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Compensation  for  Industrial  Injuries 


By  ALLEN  RIPLEY  FOOTE 


PRICE  TEN  CENTS 


COMPENSATION 


FOR 


INDUSTRIAL  INJURIES 

By  ALLEN  RIPLEY  FOOTE 


PRICE  TEN  CENTS' ' 


FUBLISHXD  BT  THE 

OHIO  JOURNAL  OF  COMMERCE 
OOLUMBUS,  OHIO 


1^ 


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Copyright  1913 

BY 

The  Ohio  Journal  of  Commerce  Company, 
Columbus.  Ohio 


*•■   •  •  «  •  S^*  ^    .  ,  • 


EXPLANATORY   PREFACE:— CONCLUSIONS 

My  ]-5urpose  in  supplying  you  with  this  duscussion  of  the  sub- 
ject of  "Compensation  for  Industrial  Injuries''  is  to  enable  you 
to  examine,  in  brief  form,  the  vital  substance  of  the  large 
amount  of  data  I  have  read  while  compiling  it. 

Your  interest  in  this  subject  is  so  direct,  I  feel  it  unnecessary 
to  urge  you  to  give  it  your  prompt  and  careful  attention. 

My  investigation  of  this  subject  has  led  me  to  the  following 
conclusions : 

(1)  The  basis  of  insurance  should  be  shifted  from  "Employ- 
ers' Liability"  to  "Workmen's  Compensation." 

(2)  The  form  of  insurance  should  be  collective,  covering  all 
employes  working  for  each  employer. 

(3)  Collective  insurance  should  be  made  compulsory  by  law 
imposed  upon  every  employer  and  employe  in  the  same  manner 
as  laws  are  imposed  requiring  the  use  of  appliances  for  acci- 
dent prevention  and  the  observance  of  sanitary  conditions  de- 
signed to  render  employment  safe  and  healthful.  This  is  nec- 
essary to  prevent  employers  who  do  not  insure  their  employes, 
and  uninsured  workmen,  from  gaining  an  unfair  competitive  ad- 
vantage over  those  who  do  comply  with  the  "Workmen's  com- 
pensation insurance  law,"  by  not  including  the  cost  of  com- 
pensation uisurance  in  the  cost  of  their  products. 

(4)  The  fact  of  collective  insurance  should  be  established  by 
an  inspector's  certificate  in  the  same  manner  and  by  the  same  in- 
s])ectors  who  certify  to  the  fact  of  compliance  with  laws  requir- 
ing the  use  of  appliances  for  accident  prevention  and  prescrib- 
ing sanitary  conditions. 

(5)  The  fact  of  compensation  insurance,  so  certified,  should 
be  a  com])lete  defense,  for  any  employer  who  has  paid  the  re- 
quired premium  for  such  insurance,  against  any  and  every  claim 
for  compensation  for  industrial  injuries  however  originating. 

263624 


(6)  While  the  fact  of  compensation  insurance  is  compulsory, 
the  method  of  insurance  should  be  elective,  subject  to  the 
choice  of  the  employer  electing  to  have  his  insurance  written  by 
one  of  the  following  methods: 

(a)  A  state  liability  board  of  awards; 

(b)  A  stock  compensation  insurance  company; 

(c)  A  mutual   co-operative    compensation   insurance    com- 

pany ; 

(d)  Self-insurance    by   complying    with   reserve    fund   re- 

quirements. 

(7)  All  compensations  for  industrial  injuries  and  terms  of 
payment  should  be  jfixed  by  statutory  law,  and  should  be  iden- 
tical for  all  compensation  insurance  by  whomsoever  written. 

(8)  The  method  of  accounting  to  show  all  costs  of  writing 
insurance  and  administration  of  the  business  of  compensation 
insurance,  and  to  establish  and  verify  tests  of  solvency,  should 
be  prescribed  by  the  State  Insurance  Department,  and  required 
of  all  writers  of  compensation  insurance  authorized  to  do  busi- 
ness in  the  state,  including  the  State  Liability  Board  of  Awards, 
in  identical  terms  and  without  discrimination. 

(9)  All  costs  of  administration,  and  all  expenses  of  every 
kind  and  nature,  incurred  by  any  writer  of  compensation  insur- 
ance should  be  charged  to  and  paid  out  of  the  fund  created  by 
the  collection  of  insurance  premiums.  This  is  necessary  in  or- 
der that  the  accounts  of  the  State  Liability  Board  of  Awards 
may  show  the  true  and  entire  cost  of  insurance  as  shown  by  the 
accounts  of  those  writing  such  insurance  by  either  of  the  other 
methods. 

(10)  The  State  Insurance  Department  should  have  power  to 
prohibit  the  selling  of  insurance  by  the  State  Liability  Board  of 
Awards,  or  by  any  insurance  company  authorized  to  do  busi- 
ness in  the  state,  at  less  than  cost,  or  at  rates  of  premium  that 
are  insufficient  fully  to  pay  the  true  and  entire  cost  of  the  busi- 
ness and  to  establish  a  reserve  fund  sufficient  to  make  the  pay- 
ment of  every  approved  claim  for  compensation  for  an  industrial 
injury  prompt  and  certain.  This  is  necessary  to  safeguard  tax- 
payers from  being  compelled  to  pay  a  part   of  the  cost  of  com- 

4 


pensation  insurance  and,  in  case  of  the  insolvency  of  the  re- 
serve fund,  from  having  public  funds  collected  from  taxpayers 
used  to  make  up  deficits.  It  is  also  necessary  to  safeguard  em- 
ployers participating  in  insurance  written  by  the  State  Liability 
Board  of  Awards  from  being  required  to  pay  extra  or  in- 
creased premiums  for  the  purpose  of  making  up  a  deficit  in  the 
fund  drawn  upon  by  that  Board  for  the  payment  of  approved 
claims  for  compensation. 

(11)  The  proposition  to  compel  taxpayers  to  pay  a  part  of 
the  cost  of  insurance,  which  should  be  paid  by  the  industry  in- 
sured, is  a  device  to  secure  the  co-operation  of  employers  in  the 
purpose  to  create  a  state  monopoly  in  such  insurance.  Unless 
human  experience  is  to  diflfer  in  the  future  from  what  it  has 
been  in  the  past,  employers  who  are  caught  by  this  bait  will  find, 
when  it  is  too  late  to  correct  their  mistake,  that  they  have  paid 
too  high  a  price  for  the  privilege  of  having  their  insurance  writ- 
ten at  a  temporarily  low  premium  rate  through  sacrificing  their 
right  and  power  to  elect  by  what  method  they  shall  be  insured. 
When  the  state  monopoly  is  established  by  this  method  as  is  in- 
tended, employers,  though  they  may  have  the  right,  will  have  no 
power  to  secure  insurance  by  any  other  method,  as  there  will  be 
no  one  engaged  in  writing  such  insurance  except  the  state. 

(12)  A  state  monopoly  in  writing  compensation  insurance 
for  industrial  injuries  is  an  entering  wedge  being  employed  by 
socialists  to  secure  state  control  of  all  industries.  The  purpose 
of  paying  the  operating  expenses  of  the  State  Liability  Board  of 
Awards  out  of  funds  collected  by  taxation  is  to  enable  that 
Board  to  sell  such  insurance  at  less  than  cost  and  by  this  means 
to  establish  a  State  monopoly  by  driving  all  competitors  out  of 
the  state.  This  unfair  method  of  competition,  when  employed 
by  industrial  competitors,  is  denounced  by  courts  and  popular 
opinion.  Why  should  it  not  be  denounced  with  equal  indigna- 
tion when  employed  by  authority  of  the  state? 

(13)  State  monopoly  established  in  compensation  insurance 
for  industrial  injuries  will  be  one  step  taken  on  the  road  to 
state  ownership  and  operation  of  all  industries.  With  the  rates 
of  insurance  premiums  subject  to  the  dictation  of  the  State  Lia- 

6 


bility  Board  of  Awards,  and  the  schedule  of  statutory  compen- 
sation subject  to  revision  at  each  session  of  the  General  As- 
sembly, employers  will,  in  the  not  distant  future,  find  themselves 
caught  in  a  net  through  the  meshes  of  which  they  cannot  escape, 
the  cords  of  which  they  cannot  break. 

(14)  To  secure  the  benefits  that  are  obtainable,  and  to  avoid 
the  evils  that  are  threatening,  as  the  outcome  of  pending  legisla- 
tion on  the  subject  of  compensation  for  industrial  injuries,  only 
such  provisions  should  be  enacted,  or  retained  in  the  law  as  are 
approved  by  at  least  seventy-five  per  cent,  of  all  employers  in 
the  state  whose  business  will  be  subject  to  the  law  as  enacted. 

You  are  urgently  requested  to  aid  in  crystalizing  and  formu- 
lating opinion  on  this  subject  hy  expressing  yon\r  ozvn  opinion 
upon  each  and  every  one  of  the  conclusions  above  stated. 

If  you  approve  of  any  of  them  as  written,  please  state  which 
ones. 

If  you  disapprove  any  of  them,  please  furnish  a  memorandum 
of  your  reasons  for  disapproving,  also  a  memorandum  stating 
your  own  suggestion  as  to  how  the  wording  of  the  conclusion 
should  be  changed,  or  what  other  statement,  if  any, -should  be 
substituted  for  the  conclusion  or  conclusions  which  you  disap- 
prove. 

I  hope  by  this  means  to  secure  an  expression  of  opinion  from 
which  it  will  be  possible  to  formulate  propositions  which  will 
commruid  the  unanimous  approval  of  all  employers  in  the  state. 

Hoping  you  will  give  this  duscussion  of  compensation  insur- 
ance for  industrial  injuries  careful  consideration  at  your  earliest 
convenience,  I  respectfully  submit  it  to  your  judgment. 

Allen  R.  Foote. 

Columbus,  Ohio,  February  8,  1913. 


INDEX 


PAdE 

Explanatory  Preface :    Conclusions 3 

Compensation  for  Industrial  Injuries 9 

Introductory    9 

The  Common  Law  of  Compensation  for  Industrial  Injuries 3  0 

Liability  Insurance  12 

Evils  of  the  Employers'  Liability  System 12 

Whose  Fault  Was  It?. 15 

Ohio  Constitutional  Amendments  Adopted  September  3,  1912 18 

The  Industry  Must  Sustain  the  Loss 23 

Industries  Must  Not  be  Overburdened  with  Compensation  Expenses  28 
Compensation   Laws    Should   be   Applied   Uniformly   to  'EJvery   In- 
dustry by  Every  State 28 

Malingering  and  Carelessness  Must  be  Guarded  Against 30 

Remedy  Proposed :    Compulsory  Statutory  Compensation  Regardle&s 

of  Fault 33 

Limitation    on    Compulsory     Statutory    Compensation:     Fault    of 

Employe   40 

Tendency   of   Employers'   Liability  and   Workmen's    Compensation 

Legislation  in  the  United  States  and  Fpreign  Countries 43 

United  States 43 

Germany  45 

England    48 

Common  Law  49 

Employers'  Liability  Act  of  1880 49 

The  Asquith  Bill 50 

Scope  of  the  Bill bj? 

The  "Negligence  Remedy'* 52 

Workmen's  Compensation  Act  of  1906 54 

Similar  Legal  Development  in  United  States  and  England 55 

Other  Countries  55 

A  Logical  Development 56 

The  Logical  Principle  for  the  United  States 56 

Accident  Insurance  in  New  Zealand 57 

American  States  and  European  Countries 58 

Chronology  of  Foreign  Industrial  Insurance  and  Workmen's  Com- 
pensation Acts  59 

Insurance  Defined 59 

Voluntary,  Compulsory  and  State  Insurance 60 

Voluntary    CO 

Compulsory GO 

Distinction  Between  Compulsory  Insurance  and   State  In- 
surance       60 

Forms  of  Insurance  Contracts CI 

Personal  Accident '. 61 

Employers'  Liability    61 

Workmen's  Collective   62 

Problems  of  Liability  and  Compensation  Insurance 62 

7 


PAGE 

Compulsory  Collective  Insurance 64 

Economic  and  Legal  Demand 65 

Purpose    65 

Personal  Accident  Insurance 65 

Employers'  Liability  Insurance .' 65 

Workmen's  Collective  Insurance 66 

Methods  of  Providing  Insurance 66 

Insurance  in  a  State  Fund 67 

Insurance  in  Incorporated  Companies 68 

Insurance  in  Mutal  Companies 68 

Level  Premium  and  Assessment  Insurance 69 

Level  Premium  Companies 69 

Assessment  Companies   70 

Insurance  Must  be  Financially  Sound 70 

Reserve  Funa  and  Profits 71 

Reinsurance  Reserve  71 

Liability  Reserve  71 

Contingency  Reserve  or  Surplus 72 

Reserve  or  Emergency  Funds 72 

Profits    72 

Requirements  of  Conservative  Progress:    Change  of  Base  from  Em- 
ployers' Liability  to  Workmen's  Compensation 73 

Workmen's  Compensation   ^ 73 

Statutory  Compensation  for  Injuries 74 

Statutory  Compensation  in  Germany 75 

Proposed  Schedule  of  Statutory  Compensation  in  Ohio 75 

Collective  Insurance  Releases  Employers  from  all  Liability 80 

Statutory  Compensation  Compulsory  on  all  Employes 81 

Method  of  Coercing  Employers  and  Employes  Into  Accepting  the 

Provisions  of  a  Workmen's  Compensation  Law 82 

No  Qualification 8? 

A  Coercive  Clause 84 

Drastic  Coercion  in  Liability  for  Death  Claims 84 

Relief  from  This  Unlimited  Liability 85 

No  Compensation  for  Injuries  Caused  by  Fauic  of  Employe:    By  His 
Refusal  or  Neglect  to  Obey  Statutory  Requirements;  or  by  His 

Intoxication  87 

Employer's    Liability  for  Injuries   Caused   by   His   Own   Fault   or 

Neglect  88 

Inspection  of  Machinery  and  Safety  Devices 89 

Creation  of  Compensation  Fundb 89 

Sufllciency  of  Compensation  Funds 90 

Safeguards  for  Compensation  Funds 92 

No  State  Monopoly  in  Compensation  Insurance — Fair  Competition. .  93 

Unfair  Competition:    Selling  Insurance  at  Less  Than  Cost 93 

Uniform  Accounts  for  All  Writers  of  Insurance 94 

Insurance  Written  by  Authorized  Companies  a  Compliance  with  the 

Compulsory  Requirements  of  the  Law 95 

Safeguarding  Good  Will 95 

The  Cardinal  Principles  of  an  Efficient  Workmen's  Compensation 

Law   96 

8 


Compensation  For  Industrial  Injuries 


By  Allen  Ripley  Footb 

COLUMBUS^  OHIO 


INTRODUCTORY 

Pending  legislation  renders  this  subject  one  of  vital  interest 
to  every  employer  and  employe  in  Ohio  and  throughout  this 
country.  The  serious  discussion  of  this  subject  proves  the 
fallacy  of  the  conclusion  reached  by  Dr.  Alfred  Russell 
Wallace,  known  as  the  "Grand  Old  Man  of  Science,"  after 
concluding  a  survey  of  man's  moral  and  intellectual  develop- 
ment from  the  earliest  days  of  the  Egyptians  and  Syrians  until 
now,  in  which  he  declares  that  for  seven  thousand  years  the 
development  of  morals  and  intellect  has  been  stationary. 

The  changed  view  with  which  compensation  for  industrial 
injuries  is  now  regarded,  comparing  the  present  with  only 
sixty  years  ago,  discloses  a  far-reaching  evolution  in  the  de- 
velopment of  morals  and  a  clearer  perception  of  the  principles 
of  justice.  All  such  changes  involve  the  displacing  of  old 
customs,  methods  and  laws  with  a  new  revision  in  accord  with 
this  clearer  perception. 

Naturally,  those  who  have  been  closely  identified  with,  and 
who  have  investments  involved  in,  the  old  system  struggle 
hard  to  save  themselves.  It  is  undoubtedly  the  part  of  wis- 
dom on  the  part  of  society  to  aid  them  in  doing  this,  provid- 
ing always  that  the  doing  of  it  does  not  necessarily  retard 
the  development  of  a  better  way. 

The  trend,  strength  and  progress  made  in  the  development 
of  morals  and  intelligence  is  never  better  seen  than  by  con- 
trast between  the  methods  now  required  for  the  elimination  of 
old  habits,  customs  and  laws,  and  those  employed  only  sixty 

9 


yfears  agfo.  This  is  graphically  shown  by  the  terrible  war 
which  was  waged  in  the  struggle  to  free  labor  from  slavery — 
1861-1865 — and  the  peaceful  methods  now  being  used  to  free 
laborers  from  the  burden  of  loss  caused  by  industrial  injuries 
not  due  to  their  own  fault.  The  consequences  of  economical 
changes  effected  by. substituting  free  for  slave  labor  in  the 
South  have  not  been  more  far-reaching  nor  more  beneficial 
than  v/ill  he  tJie  consequences  of  the  economical  changes  that 
will  be  effected  by  relieving  victims  of  industrial  injuries  from 
a  part  of  the  resulting  burden  of  their  loss  in  earning  capacity. 

No  loss  can  occur  without  causing  a  burden  to  rest  some- 
where. Everyone  possessing  perishable  values  is  liable  to  a 
loss  at  some  time.  Life  is  the  expression  of  a  bringing  into 
existence  the  new  and  eliminating  the  old.  Insurance  is  the 
expression  of  a  scientific  method  of  providing  for  a  loss,  when 
sustained  by  an  individual,  by  causing  it  to  rest  upon  the 
whole  of  society,  or  of  an  industry,  which  lives  forever,  and 
thus  protecting  the  individual  from  the  economic  conse- 
quences of  a  personal  disaster. 

In  the  days  of  Pharaoh  custom  placed  the  burden  of  in- 
dustrial injuries  upon  the  injured  workman  only.  The  fact 
that  the  loss  actually  belongs  to  society  or  to  the  industry  in 
which  the  injured  workman  was  employed,  had  not  been  dis- 
covered. 

THE   COMMON   LAW   OF  COMPENSATION   FOR 
INDUSTRIAL    INJURIES 

When  the  human  factor  in  industrial  problems  began  to 
demand  consideration,  there  appeared  in  the  common  law 
certain  provisions  which  gave  the  workman  the  right  to  re- 
cover from  his  employer,  not  from  society,  nor  from  the  in- 
dustry, compensation  for  loss  in  earning  capacity  caused  by 
industrial  injuries  sustained  under  certain  defined  conditions. 
But  the  common  law  did  not  do  this  without  making  the 
workman  responsible  for  the  loss  caused  by  industrial  in- 
juries sustained  under  certain  other  defined  conditions. 

In  a  discussion  of  the  "Workmen's  Compensation  Act"  of 
Ohio,  the  "State  Liability  Board  of  Awards"  states : 

10 


The  contract  of  employment  under  the  common  law 
imposed  the  obligation  upon  the  employer  to  use  ordi- 
nary care  in  the  following  particulars: 

1.  In  furnishing  his  employes  a  safe  place  in  which 
to  work. 

2.  In  furnishing  safe  tools  and  machinery  with 
which  to  work. 

3.  In  making  reasonable  rules  and  regulations. 

4.  In  the  selection  of  reasonably  competent  persons 
to  assist  in  the  work  to  be  done. 

The  contract  of  employment  likewise  imposed  certain 
obligations  to  be  observed  by  the  employe,  among 
which  were: 

1.  That  he  should  use  ordinary  care  to  avoid  injury 
to  himself. 

2.  That  he  should  obey  and  observe  such  reasonable 
rules  and  regulations  as  might  be  formulated  by  the 
employer  for  the  orderly  disposition  of  the  work  in 
hand,  and  for  the  safety  of  employes  generally. 

3.  That  he  should  assume  such  ordinary  risks  as  are 
incident  to  the  employment. 

4.  That  he  should  assume  the  risk  of  injury  received 
on  account  of  the  negligence  of  his  fellow  servants. 

These  conditions  imposed  by  the  common  law  to  fix  re- 
sponsibility give  the  employer  certain  defenses  against  claims 
of  his  employes  for  compensation  for  losses  sustained  by  reason 
of  industrial  injuries.  These  defenses  are  stated  by  the  above 
quoted  authority  to  be  as  follows : 

1.  That  the  employe  was  not,  when  injured,  in  the 
exercise  of  due  care,  or  was  guilty  of  contributory 
negligence. 

2.  That  the  injury  received  by  the  employe  was  one 
of  the  risks  incident  to  the  contract  of  employment. 

3.  That  the  injury  was  the  result  of  the  negligence 
of  a  fellow  servant. 

These  defenses  are  commonly  referred  to  as  "con- 
tributory negligence,"  "assumpetion  of  risk"  and  "the 
fellow  servant  rule." 

U 


It  will  thus  be  seen  that  by  the  common  law  rule,  the 
employe  assumes  all  of  the  ordinary  risks  incident  to 
his  employment,  and  that  his  employer  is  only  liable 
when  he  is  guilty  of  negligence  and  the  employe  is 
wholly  free  from  negligence  and  his  injury  was  not 
caused  by  the  negligence  of  a  fellow  servant. 

The  common  law  gave  no  right  of  action  to  the  per- 
sonal representative  of  a  killed  employe  on  account  of 
the  death  of  such  employe. 

LIABILITY    INSURANCE 

The  fixing  of  responsibility  induced  the  development  of 
liability  insurance  companies  to  insure  employers  against  loss 
on  account  of  their  liability  on  the  demands  of  their  employes 
for  compensation  for  losses  caused  by  industrial  injuries. 
These  organizations  had  for  their  purpose  the  protection  of 
the  employer,  not  of  the  employe.  Naturally,  all  procedure 
on  this  basis  tended  to  create  antagonism  between  the  em- 
ployer and  the  employe,  which  was  destructive  of  efficient 
management  and  thus  developed  through  such  antagonism  a 
collateral  cause  of  loss  from  industrial  injuries  against  which 
there  can  be  no  insurance. 

The  insurance  company,  having  insured  the  employer 
against  losses  caused  by  demands  for  compensation  on  account 
of  industrial  injuries,  sought  protection  for  itself  in  two  ways: 

First.  By  means  of  inducing  the  use  of  safety  appliances 
and  working  regulations  designed  to  reduce  liability  to  injury. 
This  was  good. 

Second.  By  resisting  the  payment  of  compensation  claims. 
This  was  bad.  This  resistance  has  finally  produced  conditions 
which  require  a  change  of  the  basis  of  insurance  from  Employ- 
ers' Liability  to  Workmen's  Compensation. 

EVILS  OF  THE  EMPLOYERS'  LIABILITY   SYSTEM. 

Writing  on  this  subject  in  1911,  Mr.  Arthur  St.  John  New- 
berry, of  Cleveland,  said: 

This  system  works  serious  injury  to  the  state,  to  the 
employer,  and  to  the  employe.     Courts  are  clogged  with 

12 


personal  injury  cases  and  justice  comes  very  slowly 
to  all  litigants.  An  employe,  if  he  recovers  at  all,  gets 
compensation  years  after  the  accident,  having  lived  as 
best  he  could  during  the  interval,  and  his  lawyers  take 
half  the  sum  paid.  The  employer  maintains  a  costly 
legal  department,  and  just  when  his  own  business  de- 
mands his  every  effort  and  moment,  may  be  called  away 
for  days  to  attend  the  trial  of  a  la^wsuit.  Worst  of  all, 
the  system  breeds  distrust  and  hatred  between  em- 
ployes and  employer  and  spreads  the  virus  of  socialism 
and  anarchy. 

The  state  and  the  employer  risk  money,  but  the  work- 
man risks  life. 

The  thing  most  important  in  any  business  is  good 
feeling  and  loyal  co-operation.  Wages,  salaries,  in- 
terest and  dividends  must  all  come  from  a  single  source, 
the  profits  of  the  business.  Distrust,  disaffection  and 
disloyalty,  working  at  cross  purposes  between  officers 
or  between  officers  and  employes,  are  the  worst  evils 
an  enterprise  can  suffer  from.  Any  method  which  re- 
moves just  grounds  for  complaint  and  promotes  loyal 
working  together  of  the  whole  force,  is  most  desirable, 
and  that  one  should  be  found,  which  will  lessen  or  en- 
tirely remedy  the  evils  of  the  present  system  of  settle- 
ment of  claims  of  injured  employes,  seems  especially 
essential. 
Mr.  Newberry  summarized  the  grave  evils  which  exist  in 
the  present  method  of  fixing  liability  for  industrial  injuries, 
and  collecting  compensation  for  the  same,  as  follows : 

First.  Uncertainty  as  to  whether  existing  safeguards 
against  accident  were  adequate. 

Second.  The  cost  to  the  state  through  clogging  of 
the  courts  by  lawsuits  for  the  recovery  of  damage's  for 
personal  injury,  and  its  loss  in  supporting  men  reduced 
to  pauperism  by  injuries. 

Third.  The  delay  in  receiving  compensation  which 
an  injured  man  must  endure,  even  if  any  liability 
existed. 

18 


Fourth.  The  expense  incurred  by  the  injured  man  in 
recovering  compensation,  through  the  division  of  the 
amount  with  lawyers  and  expenses  not  taxable  in  costs. 
Fifth.  The  expense  to  the  employer  of  maintaining 
a  costly  legal  department,  and  the  interference  with  his 
business,  through  the  time  he  may  be  compelled  to  give 
such  suits. 

Sixth.    The  bitter  feeling  aroused  between  employer 
and  employe. 
In  discussing  the  subject,  ''Employes'  Compensation  for  In- 
juries," in  Weber's  Weekly  for  January  11,  1913,  Mr.  George 
W.   Weber   points   out   the   evils  of  the   present   system   as 
follows : 

It  is   enough   to   say  that  conditions   are   confusing, 
laws    and    decisions    conflicting,    with    a    premium    on 
perjury  and  corrupt  attorneyship.     In  a  case  of  which 
I  know,  a  jury  gave  a  verdict  of  $15,000  for  a  certain 
injury — a  sum  twice  as  great  as  expected  by  the  defend- 
ant employer.     After  the  verdict,  one  of  the  jurymen 
explained  to  the  employer  that  they  allowed  the  ex- 
cessive amount  because  the  jurymen  understood  that 
the  injured  man's  lawyer  was  to  get  half  the  amount 
returned  for  the  damages  and  that  the  jurymen  thought 
the  injury  damaged  the  man  $7,500,  and  that  he  should 
have  that  amount  over  and  above  his  attorney's  fees. 
In  an  address  before  the  Illinois  Manufacturers'  Association, 
Mr.  Charles  Picz  quoted  the  Illinois  Workmen's  Compensa- 
tion Commission  as  saying: 

Out  of  a  total  of  twenty-nine  cases  of  death  decided 
by  the  courts,  the  average  recovery  was  $2,302,  and  in 
122  cases  of  disability  the  average  recovery  was  $1,347. 
The  investigation  showed  that  in  but  few  cases  are  the 
damages  actually  received  within  less  than  three  years 
after  the  accident. 
Mr.  W.  W.  Baldwin,  Vice  President  of  the  Chicago,  Bur- 
lington and  Quincy  Railroad  Company,  was  a  member  of  the 
"Iowa  Employers'  Liability  Commission."     In  a  minority  re- 
port recently  issued  Mr.  Baldwin  says: 

14 


Some  form  of  compensation  for  industrial  accidents, 
regardless  of  fault,  has  existed  for  years  in  various 
European  countries,  and  under  a  sort  oi  common  im- 
pulse for  passing  laws  of  this  nature,  fifteen  states  in 
this  country,  and  the  United  States  Senate,  have  acted 
within  the  past  four  or  five  years.  No  two  of  these 
plans  are  alike,  and  in  no  single  state  has  the  experi- 
ment continued  long  enough  for  any  definite  conclu- 
sions to  be  stated  either  regarding  the  ])lan  or  the 
wisdom  of  its  results.  My  strong  inclination  has  been 
to  recommend  postponement  of  action  in  this  state,  and 
further  study  of  the  methods  and  experience  under 
these  numerous  experiments,  with  a  view  of  securing 
for  Iowa  the  full  benefit  of  such  experience  elsewhere 
under  American  conditions 

WHOSE   FAULT  WAS   IT? 

Ev^e.ry  one  will  readily  understand  that  the  first  question 
asked  is,  "Whose  fault  was  it?"  Mr.  Baldwin  discusses  this 
crucial  question,  and  the  complications  which  it  involves,  as 
follows : 

Upon  general  principles,  no  man  should  be  held 
liable  to  pay  for  an  injury  to  another  unless  he  was  in 
some  manner  or  to  some  degree  at  fault;  much  less 
should  he,  when  without  fault,  be  liable  to  one  who  has, 
by  his  own  fault  injured  himself.  But  this  general 
principle  is  greatly  affected  and  modified  by  the  condi- 
tion that,  in  modern  industry,  especially  where  dan- 
gerous machinery  is  employed  among  large  numbers 
of  men,  the  question  of  "fault"  is  almost  always  uncer- 
tain and  complicated.  Who  shall  decide  it?  We,  say 
the  court;  but  what  does  that  mean?  It  means  an  un- 
equal contest  from  which,  if  the  injured  man  or  his 
family  are  successful,  they  emerge  after  long  delays 
and  uncertainties  with  only  a  fraction  of  what  the  emr 
ployer  pays,  while  the  employer  himself  may  be  ruined 
by  the  size  of  the  judgments  and  the  costs  of  the  trial. 
We   know,   moreover,  that,   as   necessary  incidents,  a 


considerable  portion  of  the  time  of  the  courts  is  taken 
up  with  trial  of  suits  in  damages  for  personal  injuries, 
which  adds  to  the  public  expense.  It  is  also  true  that 
burdens  are  increased  by  the  necessity  for  poor  relief 
to  those  who  have  been  injured,  and  to  their  families 
because  of  meager  compensation  long  delayed,  to  say 
nothing  of  the  unusual  bitterness  connected  with  this 
class  of  litigation. 

To  change  or  modify  this  condition,  I  would  offer 
as  the  main  justification  for  this  legislation  that  it  is  to 
protect  the  employer  from  damage  suits  and  give  to 
the  employe  for  a  limited  period  a  definite  part  of  his 
wages. 
Referring  to  these  quotations  from  Mr.  Baldwin's  minority 
report,  Mr.  Weber  says: 

It  is  especially  worth  while  to  call  attention  to  the 
fact  that  Mr.  Baldwin  takes  into  consideration  the 
"public  welfare,"  and  this  is  a  point  to  which  he  does 
well  to  direct  attention.  Hitherto,  in  most  discussions, 
this  phase  of  the  subject  has  been  disregarded,  the 
problem  having  been  treated  as  if  it  were  restricted 
to  the  individual  injured  workman  and  mulcted  em- 
ployer. As  a  matter  of  fact,  the  general  public  is  much, 
if  not  most,  concerned.  This  is  apparent  from  two  new 
points : 

1.  The  public  cannot  afford  to  have  injured  in- 
dustrial workers  and  their  families  made  a  public 
charge  to  be  taken  care  of  at  taxpayers'  expense,  nor 
to  be  forced  to  lead  a  precarious  existence  that  will 
operate  to  prevent  them  from  being  desirable  citizens. 

2.  On  the  other  hand,  in  these  days  of  railroad  and 
other  rate  regulations,  the  public  cannot  afford  to  have 
excessive  allowances  for  trivial  injuries  to  workers  be- 
cause such  expenses  of  the  employer  must  be  added  to 
the  cost  of  the  article  or  service  supplied,  enhancing  the 
cost  of  living. 

It  might  properly  be  added  that  the  public  is,  also, 
gravely   concerned   when    it   comes   to   adding   to   the 

16 


service    required    of    the    courts,    and    to    maintaining 
parasitical  lawyers,  who  incite  unnecessary  semi-black- 
mailing litigation  against  employers  who  are  willing  to 
make  reasonable  adjustments  of  personal  injury  claims. 
In  an  address  before  the  Ohio  State  Board  of  Commerce, 
November  17,  1910,  Mr.  Jas.  Harrington  Boyd,  of  Toledo,  then 
president  of  the  Ohio  Employers'  Liability  Commission,  asked 
the  following  pertinent  question : 

The  common  law  knows  no  remedy  except  that  based 
on  the  fault  of  the  defendant.     Can  the  legislature  dis- 
place  actions  based   upon  the  fault  of  the  employer, 
which  compensates  less  than  one  in  eight  of  the  work- 
men injured,  and  those  only  in  one-fifth  part  adequately, 
by  a  compensation  act  or  plan  of  insurance  which  will 
compensate  all  employes  injured,  reasonably,  with  prac- 
tically no   waste  and  to  the   great  betterment    of  the 
laboring  forces  of  the  nation  and  the  social  improve- 
ment of  the  masses?  • 
Answering  his  own  question,  Mr.  Boyd  makes  the  follow- 
ing   quotation    from    'Tolice    Power,"    by    Professor    Ernest 
Freund : 

The  principle  that  inevitable  loss  should  be  borne, 
not  by  the  person  to  whom  it  may  happen  to  fall,  but 
by  the  person  who  profits  by  the  dangerous  business  to 
which  the  loss  is  incident,  embodies  a  very  intelligible 
idea  of  justice. 
From  many  court  decisions  quoted  by  Mr.  Boyd,  I  select 
only  the  following: 

The  legislature  may  alter  or  repeal  the  common  law. 
It  may  create  new  offenses,  enlarge  the  scope  of  civil 
remedies  and  foster  responsibility  for  injuries  upon  per- 
sons against  whom  the  common  law  gives  no  remedy. 
(Bertholf  v.  O'Reilly,  74  N.  Y.,  504.) 
In  his  discussion  of  this  subject,  Mr.  Arthur  St.  John  New- 
berry says : 

The  epoch-making  decision  of  the  New  York  court 
of  appeals  unanimously  held  the  compensation  law  of 
that    state    unconstitutional    and    void,    on    the    broad 
f  17 


ground  that  our  constitutions,  state  and  federal,  do  not 
permit  any  one  to  be  held  liable  for  an  injury  that  is 
not  his  fault.  This  decision  has  been  bitterly  de- 
nounced by  labor  organizations,  and  by  very  many  good 
men  throughout  the  country,  as  reactionary,  cruel  and 
unjust.  Yet  it  is  one  of  the  very  greatest  of  recorded 
judicial  decisions,  and  no  fair-minded  and  intelligent 
man  can  read  it  without  being  struck  with  admiration. 
Its  clear  thought,  logical  reasoning,  complete  grasp  of 
fundamental  principles,  precise  distinctions,  and  par- 
ticularly its  amazingly  accurate  statement  of  the  limita- 
tion of  the  power  of  courts,  and  their  inability  to  set 
aside  constitutional  provisions,  make  it  loom  like  a 
mountain  above  the  desert  of  loosely  reasoned  and 
poorly  stated  opinions  that  make  up  the  bulk  of  our  re- 
ports. It  fully  recognizes  the  evils  of  the  existing 
system,  gives  the  highest  praise  to  the  admirable 
*  motives,  striking  ability  and  astonishing  energy  and 
diligence  of  the  Commission  that  framed  the  act,  but 
ends  with  four  impregnable  conclusions : 

First.  That  the  constitutions,  federal  and  state,  are 
the  supreme  law  of  the  land. 

Second.  That  setting  aside  constitutional  provisions 
is  not  within  the  power  of  the  legislature. 

Third.  That  courts  must  follow  the  law  and  not 
make  it. 

Fourth.  That  remedy  for  the  faults  of  the  present 
system  must  be  obtained  from  the  people  and  not  from 
the  courts. 

OHIO  CONSTITUTIONAL  AMENDMENTS  ADOPTED 
SEPTEMBER  3,  1912 

In  Ohio  the  appeal  for  a  remedy  for  the  faults  of  the  present 
system  has  been  made  to  the  people,  but  it  was  not  intelli- 
gently made ;  therefore  the  answer  is  not  intelligent. 

The  constitutional  convention  submitted  three  propositions 
to  the  electors  of  Ohio  relating  to  the  subject  of  compensation 
for  injuries  to  workmen,  September  3,  1912. 

18 


One.  Proposition  No.  5 — "Damage  for  Wrongful  Death," 
was  adopted  by  a  minority  of  only  31%  of  the  total  vote  of 
1908. 

Two.     Proposition    No.    10 — ''Welfare   of   Employes,"   was 

adopted  by  a  minority  of  only  31%  of  the  total  vote  of  1908. 

Three.     Proposition   No.   11 — "Workmen's   Compensation," 

was  adopted  by  a  minority  of  only  28%  of  the  total  vote  of 

1908. 

In  a  pamphlet  under  the  title  of  "Proposed  Amendments  to 
the  Constitution  of  Ohio,"  discussing  proposition  No.  5,  I 
quoted  the  proposition,  which  is  as  follows: 

"The  amount  of  damages  recoverable  by  civil  action  in  the 
courts  for  death  caused  by  the  wrongful  act,  neglect  or  fault 
of  another,  shall  not  be  limited  by  law,"  and  then  said : 

This  is  a  reactionary  proposition  of  the  most  radical 
type.  Running  through  all  industrial  history  there  is  a 
clearly  defined  and  constantly  growing  tendency  to 
devise  means  for  equitably  dividing  industrial  losses 
falling  upon  workmen  through  accidental  injuries,  sick- 
ness or  death. 

In  every  form  of  liability  insurance,  whether  under- 
taken by  the  state,  mutual  benefit  associations,  or  cor- 
porations, a  maximum  must  be  fixed  limiting  the 
liability  which  can  be  used  as  a  basis  of  the  premiums 
or  fees  to  be  charged  to  create  a  fund  out  of  which^ 
claims  can  be  paid. 

This  amendment  deprives  the  general  assembly  of  all 
power  to  legislate  in  any  way  that  will  fix  a  limit  to  or 
regulate  the  amount  of  damages  for  which  any  person, 
firm,  partnership,  corporation  or  association  may  be 
liable  in  a  suit  for  damages  on  account  of  accidental 
death. 

It  will  deprive  the  farmer  and  the  employer  of  less 
than  five  workmen  of  the  protection  they  now  enjoy  in 
the  maximum  rate  now  fixed  by  law.  The  maximum 
for  death  as  fixed  by  law  for  the  use  of  the  Liability 
Board  is  $3,400.     Sections  1460-61-65-67. 

19 


The  maximum  for  death  as  fixed  by  the  Norris  Act 
is  $12,000.  Section  10772.  (This  is  higher  than  that  of 
any  state  in  the  Union,  Connecticut  being  next  with  a 
maximum  of  $10,000.) 

Under  this  proposition  there  can  be  no  uniformity  in 
the  liability  to  damages  for  identical  cases  throughout 
the  several  counties  of  the  state.  By  leaving  the 
maximum  amount  that  may  be  awarded  in  each  case  to 
the  verdict  of  a  jury,  the  whole  subject  will  be  thrown 
back  to  the  common  law  and  create  endless  litigation  as 
to  whether  or  not  the  amount  awarded  by  a  jury  is  ex- 
cessive. 

As  a  final  result,  this  proposition  will  react  against 
the  wage  earner  and  tend  to  fix  the  amount  of  damages 
recoverable  on  the  basis  of  his  earning  capacity  and  not 
the  real  value  of  his  life  to  his  family,  of  which  earning 
capacity  is  but  one  factor.  This  proposition  is  a  back- 
ward step  and  will  halt  the  progressive  tendency 
toward  wise  laws,  equitably  compensating  the  family 
for  loss  and  disability.  Its  adoption  will  place  the  citi- 
zens of  Ohio  at  a  decided  disadvantage  with  other  states 
in  dealing  with  this  vitally  important  subject. 
Proposition  No.  10  is  as  follows: 
"Laws  may  be  passed  fixing  and  regulating  the  hours  of 

labor,  establishing  a  minimum  wage,  and  providing  for  the 

comfort,  health,  safety  and  general  welfare  of  all  employes ; 

and  no  other  provision  of  the  constitution  shall  impair  or  limit 

this  power." 

The  official   explanation  of  this   proposition   made   by   the 
constitutional  convention,  is  as  follows : 

This  amendment  will  permit  the  passage  of  humane 
laws  in  conformity  with  modern  industrial  development 
to  improve  the  conditions  of  employment  of  men, 
women  and  children.  In  the  absence  of  such  a  pro- 
vision in  our  state  constitution  a  number  of  such  laws 
have  heretofore  been  held  void. 

20 


Please   notice   that   no   intimation    is   here    given  that  this 
amendment  may  be  used  to  limit  the  maximum  recoverable  as 
compensation  for  death  caused  by  an  industrial  accident. 
Proposition  No.  11  is  as  follows: 

**For  the  purpose  of  providing  compensation  to  workmen 
and  their  dependents,  for  death,  injuries  or  occupational  dis- 
eases, occasioned  in  the  course  of  such  workmen's  employ- 
ment, laws  may  be  passed  establishing  a  state  fund  to  be 
created  by  compulsory  contribution  thereto  by  employers  and 
administered  by  the  state,  determining  the  terms  and  condi- 
tions upon  which  payment  shall  be  made  therefrom,  and  tak- 
ing away  any  or  all  rig-hts  of  action  or  defenses  from  employes 
and  employers ;  but  no  right  of  action  shall  be  taken  away 
from  any  employe  when  the  injury,  disease  or  death  arises 
from  failure  of  the  employer  to  comply  with  any  lawful  re- 
quirement for  the  protection  of  the  lives,  health  and  safety  of 
employes.  Laws  may  be  passed  establishing  a  board  which 
may  be  empowered  to  classify  all  occupations,  according  to 
their  degree  of  hazard,  to  fix  rates  of  contribution  to  such 
fund  according  to  such  classification,  and  to  collect,  administer 
and  distribute  such  fund,  and  to  determine  all  rights  of 
claimants  thereto." 

The  official  explanation  of  this  proposition,  made  by  the 
constitutional  convention,  is  as  follows : 

This  amendment  will  permit  legislation  providing 
that  workmen  who  have  been  injured  or  who  have  con- 
tracted an  occupational  disease  in  the  course  of  their 
employment,  and  the  dependents  of  workmen,  who  have 
been  killed  or  who  may  have  died  from  injuries  received, 
or  occupational  diseases  contracted  in  the  course  of 
such  employment,  shall  be  compensated  out  of  a  fund 
maintained  by  compulsory  contributions  by  the  indus- 
tries of  the  state,  which  funds  shall  be  under  the  control 
and  supervision  of  the  state. 
In  discussing  this  proposition,  I  said : 

This  proposition  covers  all  employes,  whereas  the 
explanation  states,  and  is  intended  to  lead  electors  to 
believe,  that  it  will  apply  to  industries  only.     The  word 

21 


''industries"  where  it  occurs  in  the  explanation  should 
be  changed  to  ''employers,"  which  includes  farmers, 
merchants,  manufacturers,  builders,  railroads,  and  all 
employers  regardless  of  the  number  of  their  employes. 

This  proposition  contemplates  a  fund  to  be  provided 
by  employers  only,  for  the  purpose  of  insuring  employes 
against  sickness  or  death  from  any  cause. 

The  principle  of  creating  a  fund  by  compulsory  laws, 
to  be  provided  by  one  class  for  the  benefit  of  another 
class,  who  receive  all  of  the  benefits  but  are  not  re- 
quired to  make  any  contribution  to  the  fund  from  which 
benefits  are  to  be  paid,  is  vicious  in  the  extreme.  It 
tends  to  destroy  the  foundation  of  a  vigorous,  self- 
respecting  and  self-sustained  independent  manhood. 

The  adoption  of  this  proposition  will  tend  to  create 
a  privileged  class  enjoying  a  special  privilege  and  will 
lead  to  class  legislation  of  the  most  oppressive  and  ob- 
noxious character.  Employers  and  employes  should 
both  be  required  to  contribute  to  a  benefit  fund,  if  such 
a  fund  is  to  be  established  and  administered  in  accord- 
ance with  the  requirements  of  sound  economics  and 
morals. 

The  demand  that  employers  only  shall  be  required  to 
make  contributions  necessary  to  establish  and  maintain 
such  a  benefit  fund  comes  exclusively  from  the  legisla- 
tive lobbyists  of  trade  unions.  Their  purpose  is  to  pro- 
tect the  funds  of  trade  unions  from  diminution  by 
reason  of  a  demand  for  decreased  dues  on  account  of 
contributions  to  a  state  benefit  fund.  Trade  Union  man- 
agers do  not  want  the  state  to  compete  with  them  by 
drawing  contributions  from  their  own  source  of  supply. 
Incidentally,  this  class  of  legislation  enables  legislative 
lobbyists  to  magnify  their  importance  and  strengthen 
their  grip  on  their  jobs  by  being  able  to  show  their  sup- 
porters the  benefits  they  have  secured  for  them  at  the 
expense  of  some  one  else. 

A  law  requiring  the  maintenance  of  this  benefit  fund 
by  taxation  would  be  far  more  just  than  the  measure 


proposed,  because  it  would  cause  the  burden  to  rest 
upon  all  classes  of  the  community  who  are  served  by  all 
classes  of  employes. 

The  requirements  of  justice  are  a  safer  guide  for  con- 
stitutional provisions  and  statutory  laws  than  the  de- 
mands of  prejudice  and  a  sordid  selfishness  that  con- 
tinually seeks  to  secure  something-  for  nothing,  a  pro- 
ceeding that  partakes  of  the  nature  of  stealing. 

Those  who  favor  this  graft  in  private  employment 
can  be  depended  upon  to  favor  graft  in  public  employ- 
ment. Those  who  believe  in  honest  labor,  just  com- 
pensation and  brotherly  assistance  for  the  unfortunate 
will  repudiate  this  attempt  to  legalize  and  make  com- 
pulsory a  graft  to  be  imposed  upon  one  class  for  the 
benefit  of  another  class. 

Germany  safeguards  the  workers  at  all  times  by  con- 
tributions from  both  employers  and  employes.     Modern 
tendencies   are    toward    the    German    plan,   which    this 
proposition  will  prevent. 
The  principles  of  justice  are  immutable.     Attempts  to  apply 
these   principles   in   the   provisions  of  organic   and   statutory 
laws   change   as   human   conceptions   of   justice   change.     To 
write  true  principles  of  justice  into  organic  and  statutory  laws 
is  to  make  true  progress.     To  take  such  principles  out  of  a 
law,  or   to  adopt  provisions   in   constitutions   which   prevent 
their  incorporation  in  statutory  enactments,  is  to  be  reaction- 
ary in  the  most  harmful  manner. 

To  hold  any  one  liable  for  an  injury  that  is  caused  by  no 
fault  of  his  own  is  clearly  unjust. 

Great  care  must  be  exercised  to  prevent  the  attempt  to  re- 
vise the  common  law  in  these  respects  from  becoming  reac- 
tionary and  revolutionary  by  moving  from,  instead  of  toward, 
the  application  of  the  principles  of  justice  clearly  perceived 
and  intelligently  understood. 

THE  INDUSTRY  MUST  SUSTAIN  THE  LOSS 

Every  industrial  injury  causes  an  economic  loss.  Who  shall 
bear  the  burden  of  this  loss? 

23 


The  first  answer,  affirmed  by  social  custom,  was — The 
Workman. 

The  second  answer,  affirmed  by  the  common  law,  was — The 
employer,  for  losses  caused  under  certain  conditions;  the 
workman,  for  losses  incurred  under  all  other  conditions. 

The  third  answer,  now  being  given  by  the  application  in 
statutory  law  of  principles  discerned  by  a  clearer  perception 
of  the  requirements  of  social  and  economic  justice,  is — The 
Industry. 

The  Michigan  Workmen's  Compensation  Commission,  in 
explaining  the  legislative  measure  it  recommended  for  enact- 
ment, says: 

We  have  made  no  provision  for  contribution  by  em- 
ployes to  the  funds  necessary  to  pay  the  compensation 
accruing  under  this  act.  While  it  has  been  said  with 
much  force  that  such  contribution,  however  small,  by 
employes,  will  tend  to  give  them  a  feeling  of  added  re- 
sponsibility, and  that  as  the  law  covers  accidents  arising 
from  carelessness,  as  well  as  from  industrial  hazards, 
they  ought  morally  to  share  the  burden,  yet,  after  full 
consideration  of  this  subject,  we  have  reached  the  con- 
clusion that  it  is  not  wise  to  recommend  that  they  be 
required  to  do  so.  In  reaching  this  conclusion  we  have 
had  in  mind  that  employers  may,  to  some  extent,  add 
the  amount  of  such  payments  to  the  cost  of  production, 
which  of  course,  could  not  be  done  by  employes  except 
by  demanding  an  increase  of  wages  to  that  amount. 
Finally,  we  think  that  the  physical  injury  and  suffering 
of  the  employe  is  quite  sufficient  to  constitute  his  por- 
tion of  this  industrial  burden. 
Mr.  William  C.  Archer,  Secretary  of  the  Ohio  State  Liability 
Board  of  Awards,  says : 

Wages  paid  employes  are  earned  in  the  labor  per- 
formed, the  laborer  being  worth  his  hire.  The  risk  as- 
sumed is  assumed  for  others  and  the  resultant  loss  and 
distress,  uncompensated,  are  borne  by  the  injured  and 
his  dependents.    To  distribute  this  loss  among  many  the 

24 


great  principle  of  insurance  is  invoked.     It  is  applied 

by  making  industries  bear  the  losses  caused  by  them. 

In  the  "Journal  of  Workmen's  Compensation  Insurance," 

published  by  the  Ohio  State  Liability  Board  of  Awards,  for 
September  1,  1912,  Mayor  Gaynor  of  New  York  is  quoted  as 
follows : 

The  theory  is  to  pay  for  breaking  or  killing  a  man 
the  same  as  you  pay  for  breaking  or  destroying  a  ma- 
chine, and  it  all  goes  into  the  cost  of  production.     That 
means  that  it  goes  into  the  price  which  the  consumer 
pays  for  the  article.     In  that  way  the  whole  community 
stands   the   burden   of   these   unfortunate   accidents   in 
place  of  allowing  those  hurt  to  go  to  the  poorhouse   or 
become  paupers. 
In  the  case  of  State  ex  rel.  v.  Clausen,  Auditor,  117  Pac, 
1101,  in  which  the  Workmen's  Compensation  and  Compulsory 
State  Insurance  Law  of  the  State  of  Washington  was  held  not 
to  be  violative  of  the  state  nor  of  the  federal  constitution,  and 
clearly  within  the  police  power  of  the  state,  Chief  Justice  Fol- 
lerton  of  the  Supreme  Court  of  Washington,  is  reported  to 
have  said : 

It  seems  that  no  matter  how  carefully  laws  for  the 
prevention  of  accidents  in  such  industries  be  framed, 
or  how  rigidly  they  may  be  enforced,  there  is  an  element 
of  human  equation  that  enters  into  the  problem  which 
cannot  be  eliminated  and  which  invariably  causes  per- 
sonal injuries  and  consequent  financial  losses  to  work- 
men engaged  therein.  Heretofore  these  losses  have 
been  borne  by  the  injured  workmen  themselves,  by  their 
dependents,  or  by  the  state  at  large.  It  was  the  belief 
of  the  legislature  that  they  should  be  borne  by  the 
industries  causing  them,  or,  perhaps  more  accurately, 
by  the  consumers  of  the  products  of  such  industries. 
That  the  principle  sought  to  be  put  into  effect  is 
economically,  sociologically  and  morally  sound,  we 
think  must  be  conceded. 
I  quote  the  following  from  a  speech  of  Hon.  George  Suther- 
land, United  States  Senator  from  Utah,  April  16,  1912,  the 

25 


Senate  having  under  consideration  the  bill  (S.  5382)   to  pro- 
vide an  exclusive  remedy  and  compensation  for  accidental  in- 
juries, resulting  in  disability  or  death,  to  employes  of  common 
carriers  by  railroads   engaged   in   interstate  or  foreign   com- 
merce or  in  the  District  of  Columbia,  and  for  other  purposes : 
It  will  be  seen  from  the  statistics  (and  I  could  quote 
much  more  to  the  same  efifect  if  I  had  the  time)   that 
more  than  one-half,  on  the  average,  of  all  these  accidents 
are  due  to  the  natural  hazard.    So  long  as  we  leave  the 
employers'  liability  law  in  force  with  the  element  of  neg- 
ligence at  the  basis  of  it,  half  of  those  accidents  must 
go   unrecompensed.      The   suffering  of    the   man   who 
loses  his  leg  as  a  result  of  the  inherent  risk  of  the  in- 
dustry, or  as  the  result  of  his  own  negligence,  is  just 
as  great  as  that  of  the  man  who  loses  it  as  the  result  of 
the  negligence  of  his  employer.    The  hardship  upon  the 
widow  and  children  of  the  man  killed  as  the  result  of 
the  hazards  of  the  industry,  or  as  the  result  of  his  own 
negligence,  is  just  as  great  as  though  it  was  due  to  the 
negligence  of  the  employer. 

We  must  take  great  care  that  these  people  do  not 
become  wrecks,  human  driftwood  in  society.  That  is 
one  object  of  this  legislation.  The  law  of  negligence 
is  hard;  it  is  unjust,  it  is  cruel  in  its  operation.  The 
law  of  compensation  proceeds  upon  broad  humanitarian 
principles.  It  says  that  when  a  man  has  been  injured  in 
an  industry,  he  is  a  soldier  in  that  industry,  and  the 
industry  must  take  care  of  him  to  some  extent. 

Mr.  Heyburn.  The  Senator  uses  the  expression 
"We  must  take  care  of  these  people."  I  assume  he 
means  that  the  employer  must  be  compelled  to  provide 
for  them.  Of  course  there  is  no  governmental  applica- 
tion of  the  term. 

Mr.  Sutherland.  Oh,  no ;  society  in  the  last  analysis 
must  take  care  of  these  people,  because  if  the  injured 
man  or  the  family  that  is  left  is  not  compensated  by 
the  industry  directly,  they  become  a  charge  upon 
society.     They  must  be  taken  care  of  in  our  charitable 

26 


institutions  and  in  one  way  and  another;  they  must 
support  themselves  very  often  by  unaccustomed  and 
poorly  paid  work. 

Mr.  Heyburn.  Has  the  Senator — he  doubtless  has — 
taken  into  consideration  the  effect  upon  the  expense  of 
the  business  itself?  To  what  extent  would  the  Senator 
carry  this  question  of  compensation  as  compared  with 
the  ability  of  the  employer  to  meet  the  liability? 

Mr.  Sutherland.  This  bill  proceeds  upon  the  theory 
that  we  pay  half  wages. 

Mr.  Crawford.  May  I  inquire,  does  the  Senator  deal 
with  this  phase  of  it,  that  these  employes  enter  into 
the  question  of  efficiency;  that  in  one  sense  their  rela- 
tion to  industry  is  a  relation  that  goes  toward  keeping 
up  in  the  highest  state  of  efficiency  the  operating  in- 
dustry, as  a  locomotive  that  has  been  damaged  must 
be  kept  up  in  an  efficient  condition  of  repair ;  that  these 
men  are,  in  a  way,  devoting  their  lives  to  the  work  of 
railroading;  that  they  are  unfit  for  anything  else;  that 
all  their  training  is  blended  with  that  operation;  and 
that  they  are  in  one  sense  a  part  of  the  plant  itself  and 
entitled  to  consideration  upon  that  theory? 

Mr.  Sutherland.  Yes.  The  Senator  from  South  Da- 
kota very  well  states  it.  These  men,  in  a  sense,  may  be 
regarded  as  the  human  part  of  the  machinery  which  they 
operate.  When  a  piece  of  machinery  is  broken,  when 
a  boiler  is  destroyed,  the  industry  must  replace  it ;  it 
bears  the  expense  of  it.  When  the  man  who  operates 
the  machine  is  injured,  the  industry  must  take  care  of 
him  and  must  repair  that  damage. 

It  must  be  so,  because  when  capital  is  invested  in  a 
railroad  enterprise,  for  example,  it  must  be  permitted 
to  have  a  rate  which  will  afford  compensation  for  the 
work  it  does.  If  you  reach  into  the  treasury  of  the  rail- 
road company  for  any  expense,  for  making  better  road- 
ways, for  compensating  for  these  injuries,  or  for  any 
other  purpose,  it  becomes  a  part  of  the  operating  ex- 
penses of  the  railroad.    They  charge  to  their  operating 

27 


expenses  now  the  amount  they  pay  out  in  personal 
injury  cases  and  the  damages  which  they  pay.  So,  in 
the  last  analysis,  it  is,  of  course,  shifted  to  the  public. 

INDUSTRIES  MUST  NOT  BE  OVERBURDENED  WITH 
COMPENSATION  EXPENSES. 

Bringing  this  element  of  the  question  into  view,  Mr.  Arthur 
St.  John  Newberry  says: 

Competition  is  now  so  keen  and  general,  and  trans- 
portation over  considerable  distances  so  easy  and  so 
cheap,  that  even  a  small  handicap  on  an  industry  may 
cause  its  failure.  A  slightly  greater  burden  imposed  on 
manufacturers,  in  one  state,  may  result  in  putting  them 
at  a  hopeless  disadvantage  against  producers  of  the  same 
product  in  another  state,  where  such  is  not  imposed. 
Uniformity  in  legislation  between  all  our  states,  and 
even  between  a  few  states  closely  contiguous,  has 
already  been  found  practically  impossible.  It  should 
be  clear,  even  to  the  most  ardent  advocate  of  the  pro- 
tection of  the  poor,  that  the  destruction  or  even  hamper- 
ing of  a  great  industry  may  do  much  greater  harm  to 
the  workman  than  a  continuance  of  the  present  system, 
cruel  and  harsh  as  it  is.  Those  who  declaim  about 
making  the  loss  caused  by  accident  a  charge  on  an 
industry  should  first  consider  whether  the  industry  can 
bear  the  load  and  what  the  result  will  be  if  it  cannot. 

COMPENSATION  LAWS  SHOULD  BE  APPLIED  UNI- 
FORMLY TO  EVERY  INDUSTRY  BY 
EVERY  STATE 

The  commercial  competition  within  industries  of  employers 
with  employers,  employes  with  employes ;  of  industry  with  in- 
dustry ;  of  municipality  with  municipality ;  of  state  with  state, 
of  nation  with  nation,  is  an  economic  fact  that  can  be  ignored 
by  legislators  only  at  the  peril  of  the  communities  they  tem- 
porarily represent.  The  most  accurate  information  obtainable, 
the  most  intelligent  conception  of  moral  and  economic  princi- 
ple that  can  be  evolved  from  the  brains  of  man;  the  most 

28 


thorough  and  capable  experience  in  the  practical  management 
of  industrial  business,  must  be  utilized  to  secure  a  right  solu- 
tion of  the  many  problems  involved  in  the  proposition  to  give 
every  workman  a  legal  right  to  statutory  compensation  for 
loss  of  earning  capacity  caused  by  industrial  injuries  regard- 
less of  fault.  When  such  a  solution  is  found,  to  make  it  most 
helpful  and  effective,  it  should  be  applied  uniformly  to  every 
industry  and  by  every  state.  In  no  class  of  legislation  is  there 
a  greater  demand  for  uniformity  than  in  laws  affecting  the 
regulation  of  business  and  the  welfare  of  workingmen.  State 
boundaries  have  no  power  to  place  a  limitation  upon  the 
operation  of  moral  and  economic  principles.  . 

In  a  "Review  of  Labor  Legislation  in  the  United  States 
for  the  Year  1909,"  Irene  Osgood,  Assistant  Secretary,  Ameri- 
can Association  for  Labor  Legislation,.  New  York  City,  says : 
The  greatest  need  in  the  field  of  labor  legislation  is 
the  establishment  of  scientific  standards.  The  chaotic 
condition  of  such  legislation  in  this  country  is  every- 
where recognized.  This  lack  of  uniformity  is  due 
partly  to  the  fact  that,  where  England,  for  instance, 
has  one  body  enacting  legislation,  we  have  fifty  bodies 
politic,  each  with  different  industrial  conditions  and 
with  different  ideas  as  to  what  is  constitutional.  It  is 
significant  that  this  lack  of  uniformity  has  led  to  the 
organization  of  a  special  national  association  to  promote 
scientific  study  of  labor  legislation.  Forty-two  states 
held  legislative  sessions  during  1909.  A  flood  of  labor 
bills  were  introduced  and  nearly  four  hundred  were 
enacted  into  law. 

*  *  *  From  all  directions  comes  the  recognition  of 
the  need  of  more  careful  study  of  the  underlying  condi- 
tions which  require  remedy  by  legislation.  *  *  * 

Beyond  question  labor  legislation,  in  order  to  be  effec- 
tive, must  be  based  upon  the  ascertained  facts  of  the 
conditions  pervading  each  particular  industry.  *  *  * 
The   most  obvious   defect   in   the   literature   issued   by   the 
Workmen's  Compensation  Commissions  of  the  several  states, 
and  by  the  various  State  Boards  created  to  administer  the 

29 


laws  thus  far  enacted,  is  seen  in  their  disposition  to  become 
partisan  advocates  of  new  and  really  untried  methods  as 
against  established  methods  with  which  society  has  had  ex- 
perience. All  of  this  literature  is  biased  by  a  keen  appreciation 
of  political  advantage  and  an  inadequate  deference  to  moral 
and  economic  requirements.  Having  no  personal  liability  for 
losses  that  their  mistakes  may  cost  employers  or  taxpayers, 
the  disposition  is  to  take  unwise  chances  by  basing  judgment 
and  procedure  on  conclusions  drawn  from  insufficient  experi- 
ence. They  do  not  realize  that  sympathy  is  really  helpful 
only  when  guided  by  justice. 

These  defects  cannot  be  wondered  at  when  consideration 
is  given  to  the  astute  cunning  with  which  trade  union  leaders 
play  on  the  sympathies  of  the  public  to  secure  support  for 
labor  legislation  of  their  devising.  The  popular  mind  is  ever 
ready  to  respond  to  appeals  from  those  who  claim  they  are 
the  victims  of  oppression.  Impressed  by  this  fact,  Mr.  New- 
berry well  says : 

Workmen's     compensation    acts     are     produced     by 
sympathy  with  the  hard  lot  of  the  laborer,  and  a  widely 
spread  feeling  that  he  should  receive  much  greater  con- 
sideration and  protection  than  is  now  afforded  him.  This 
feeling  is  natural  and  justifiable,  but  hasty  yielding  to 
humanitarian  impulses  may  produce  evils  greater  than 
those  which  they  seek  to  remedy. 
Under  such  conditions  it  causes  no  surprise  to  find  that  the 
workmen's   compensation   laws   that  have   been   proposed   or 
enacted  are  not  supplementary  to  the  common  law,  but  directly 
opposed  to  it;  not  reformatory,  but  revolutionary. 

MALINGERING  AND   CARELESSNESS   MUST   BE 
GUARDED  AGAINST 

Here  the  human  element  becomes  a  dominating  factor. 
Through  all  the  aeons  of  human  life  men  have  been  eager  to 
secure  personal  benefits  by  cunning  craft,  regardless  of  the 
injustice  to  others  of  their  conduct.  This  is  the  initial  cause 
of  time-serving  and  graft  in  public  employment.  Evidently 
this  evil  element  in  human  character  is  developed  by  oppor- 

30 


tunity.  Such  opportunity  is  offered  by  the  adoption  of  a 
schedule  of  statutory  compensations  for  all  industrial  injuries 
however  caused,  regardless  of  fault. 

The  Ohio  State  Liability  Board  of  Awards,  discussing  this 
subject  in  the  "J^^^^^l  o^  Workmen's  Compensation  Insur- 
ance" for  July  1,  1912,  says: 

Malingering,  or  feigning  of  disability  from  injury  or 
disease  has  occurred  in  every  age,  every  country  and 
every  class  of  society.  Perhaps  it  is  traceable  to  a 
primitive  instinct,  that  instinct  which  from  fright  will 
cause  the  opossum  to  assume  the  appearance  of  death, 
the  robin  to  be  badly  wounded  when  leading  you  away 
from  her  young. 

The  Bible  tells  us  how  David  "feigned  himself  mad." 
In  Greek  mythology,  we  learn  how  Ulysses  plowed  the 
sand  to  escape  military  service,  how  his  malingering 
was  detected  by  placing  his  infant  son  in  the  furrow. 

In  the  administration  of  workmen's  compensation 
laws  it  has  been  the  experience  to  find  a  great  many 
attempts  at  malingering  or  feigning  of  disability  follow- 
ing an  accident,  due  principally  to  the  compensation 
feature. 

Who  among  us  has  not  heard  the  blood  surging  to 
the  head  when  awake  or  worried?  When  in  health,  if 
not  worried,  we  would  not  give  the  matter  a  thought. 
We  have  all  carried  on  our  ordinary  vocations  at  times 
having  small  disabilities  but  not  allowing  them  to  get 
the  mastery  over  us.  Thus  in  sickness  even  normal 
conditions  become  to  the  perturbed  mind  of  the  patient 
symptoms  of  ailment. 

Twenty  years  ago  a  nervous  breakdown  as  the  result 
of  an  accident  was  not  admitted,  but  now  some  actually 
believe,  when  suffering  from  a  minor  accident  but  nar- 
rowly escaping  a  serious  accident,  that  they  should  be 
compensated,  not  for  the  injury  actually  received,  but 
for  the  danger  which  is  threatened.  When  a  workman 
receives  a  trifling  injury,  his  idea  sometimes  is  that  he 
mu3t  receive  substantial  damages,  then  when  he  is  well 

31 


he  persuades  himself  that  he  is  still  ill.  Most  employers 
have  seen  such  cases.  They  are  decidedly  difficult  to 
detect. 
During  the  Civil  War  it  was  not  an  uncommon  occurrence 
for  soldiers  to  seek  discharge  from  military  service  by  means 
of  a  self-inflicted  wound.  Afterward  they  were  not  ashamed 
to  exhibit  the  depravity  of  their  natures  by  making  application 
for  a  pension  on  account  of  such  wound.  If  the  pension  roll 
could  be  relieved  from  all  payments  claimed  by  malingering 
soldiers,  ''their  sisters,  their  cousins  and  their  aunts,"  an  in- 
definite number  of  millions  of  dollars  would  be  saved  annually 
for  the  taxpayers  of  the  United  States.  This  condition  has 
been  the  outgrowth  of  "bids  for  votes"  by  demagogues.  How 
long  will  it  be  before  similar  conditions  will  prevail  in  state 
politics  when  the  army  of  industrial  workers  is  offered  a  fixed 
compensation  for  every  industrial  injury,  however  caused,  re- 
gardless of  fault?  No  person  who  will  think  of  this  proposi- 
tion with  unprejudiced  intelligence  can  fail  to  see  the  danger 
of  a  repetition  of  the  evils  and  scandals  of  pension  legislation 
that  is  involved  in  laws  providing  statutory  compensation  for 
industrial  injuries,  administered  by  the  appointees  of  politicians 
in  office. 

Certainty  of  compensation  for  loss  of  earning  capacity 
caused  by  an  industrial  injury  will  inevitably  tend  to  induce 
carelessness.  This  fact  is  clearly  pointed  out  by  Mr.  New- 
berry when  he  says: 

It  is  at  least  doubtful  whether  lessening  the  penalties 
for  heedlessness  will  not  have  a  positively  deteriorating 
effect  on  those  it  is  sought  to  benefit,  and  whether  a  law, 
granting  greater  protection  in  case  of  accident,  may  not 
haVe  the  disastrous  effect  of  increasing  accidents.  Most 
of  the  injuries  occurring  in  any  business  come  from  the 
carelessness  of  the  injured  men  themseves,  and  the 
multiplication  of  safety  appliances  and  the  most  urgent 
warnings  and  cautions  will  not  prevent  them  from 
taking  risks  that  no  reasonable  person  would  venture 
on.  Familiarity  with  dangers  breeds  contempt  of  them, 
contempt  breeds  lack  of  care,  until,  at  last,  frail  flesh 

32 


and  blood  is  crushed  against  stone  and  steel.     Though 
they  know  the  dreadful  consequences  of  injury,  men  are 
still  constantly  injured  solely  from  their  own  reckless- 
ness.   It  is  possible  that  decreasing  the  penalties  of  care- 
lessness may  lessen  care,  that  sure  compensation  for 
accidents  may  increase  accidents,  that  a  system  put  in 
force  with  the  most  earnest  desire  to  do  good,  may  in 
fact  do  the  greatest  harm. 
To  be  helpful  without  impairing  a  manly  desire  to  be  self- 
supporting  and  without  belittling  a  noble  self-respegt,  is  the 
most  difficult  problem  in  human  relationship.     This  problem 
is  present  in  every  remedy  proposed  for  the  cure  of  the  evils 
which  all  acknowledge  are  to  be  found  in  the  existing  system 
of  employers'  liability.     "Every  law  not  based  on  wisdom  is  a 
menace  to  the  State." 

REMEDY  PROPOSED:     COMPULSORY  STATUTORY 
COMPENSATION  REGARDLESS  OF  FAULT 

This  remedy  will  be  found  in  nearly  every  recommendation, 
proposed  measure,  and  enacted  law. 

In  its  "Immediate  Legislative  Program,"  December,  1912, 
the  American  Association  for  Labor  Legislation  says: 

"The  adoption  of  some  uniform  compensation  measure,  and 
its  extension  to  all  states,  including  those  which  have  so  far 
taken  no  action,  is  urgently  needed." 

In  support  of  this  statement,  it  quotes  from  the  report  of 

the  "Committee  on  Compensation  for  Industrial  Accidents  and 

Their  Prevention"  of  the  American  Bar  Association,  submitted 

at  its  annual  meeting  at  Milwaukee,  August,  1912,  as  follows: 

The  consensus  of  opinion  is  that  uniform  laws  for 

compensation  for  industrial  accidents  should  be  enacted 

by  all  the  states  and  by  the  United  States  within  its 

jurisdiction.    Such  a  law  should,  in  the  opinion  of  your 

committee,  be  based  on  the  following  principles: 

1.  It  should  be  compulsory  and  exclusive  of  other 
remedies  for  injuries  sustained  in  course  of  industrial 
employment. 

88 


2.  It  should  apply  to  all  industrial  operations  or  at 
kast  to  all  industrial  organizations  above  a  certain  limit 
of  size. 

3.  It  should  apply  to  all  accidents  occurring  in  the 
course  of  industrial  operations  regardless  of  the  fault 
of  anyone,  self-inflicted  injuries  not  being  counted  as 
accidents. 

4.  The  compensation  should  be  adjudicated  by  a 
prompt,  simple  and  inexpensive  procedure. 

^5.  The  compensation  should  be  paid  in  regular  in- 
stallments continuing  during  the  disability  or  in  case 
of  death  during  dependent  period  of  beneficiaries. 

6.  The  compensation  should  be  properly  propor- 
tioned to  the  wages  received  before  injury. 

7.  The  compensation  should  be  paid  with  as  near 
absolute  certainty  as  possible,  in  the  most  convenient 
manner,  and  there  should  be  adequate  security  for  de- 
ferred payments. 

Your  committee,  however,  is  of  the  opinion  that  a 
very  important  branch  of  the  subject  referred  to  is  the 
prevention  of  industrial  accidents  and  that  every  effort 
should  be  made  to  procure  the  adoption  of  uniform  laws 
for   proper   safeguarding  of   industrial   employes   from 
accident,  and  that  this  element  should  always  be  con- 
sidered in  connection  with  any  scheme  for  compensa- 
tion for  industrial  accidents. 
As  pointed  out  by  this  committee,  the  prevention  of  indus- 
trial accidents  is  an  important  branch  of  this  subject,  but  it 
cannot  be  discussed  at  this  time.     If  the  old  adage  that  "an 
ounce  of  prevention  is  worth  a  pound  of  cure"  is  true,  the  sub- 
ject of  prevention  of  industrial  accidents  is  sixteen  times  as 
important  as  the  subject  of  compensation  for  industrial  acci- 
dents. 

The  trend  of  legislation  on  this  subject,  proposed  and  en- 
acted, is  clearly  shown  by  the  following  concise  statement 
quoted  from  a  pamphlet  issued  by  the  ''Ohio  State  Liability 
Board"  under  the  title  of  "Workmen's  Compensation  Act  of 
the  State  of  Ohio,  with  Appendix  and  Notes  to  Sections": 

84 


Under  the  law  as  it  formerly  existed,  compensation 
for  injuries  was  uncertain,  both  as  to  the  right  to  recover 
and  the  amount  to  be  recovered  in  case  of  legal  liability. 
The  law  placed  no  limit  upon  the  amount  to  be  re- 
covered for  an  injury,  and  any  amount  not  exceeding 
$12^000.00  could  be  recovered  in  case  of  wrongful  death. 
Under  the  new  law,  the  right  to  receive  compensation 
for  all  injuries,  as  well  as  the  amount  of  the  compensa- 
tion, is  definite  and  certain,  as  determined  by  the 
rule  fixed  by  the  terms  of  the  act.  In  other  words,  the 
new  law  substitutes  certainty  of  liability  and  amount  of 
award  for  uncertainty. 

To  summarize : 

1.  (a)  At  common  law:  Established  fault  or  negli- 
gence of  the  employer  is  the  sole  basis  of  recovery  in 
an  action  by  an  employe  for  injury  received  in  the 
course  of  his  employment. 

(b)  In  all  such  actions  the  employer  may  plead  either 
the  "contributory  negligence,"  ''assumed  risk,"  or  "fel- 
low-servant" defense,  as  may  be  appropriate. 

(c)  No  right  of  recovery  exists  for  wrongfully  caus- 
ing death. 

2.  The  common  law,  prior  to  the  enactment  of  the 
Workmen's  Compensation  Law,  was  modified  by 
statute  in  Ohio : 

(a)  By  authorizing  recovery  for  wrongful  death  not 
exceeding  $12,000.00  in  amount. 

(b)  By  requiring  certain  safety  devices  and  appli- 
ances to  be  used  in  certain  hazardous  occupations  and 
denying  the  employer  the  right-  to  assert  the  so-called 
common  law  defenses  where  such  required  safety  de- 
vices or  appliances  are  not  provided  and  injury  or  death 
results  from  such  failure ;  and  by  making  the  employer 
prima  facie  guilty  of  negligence  where  an  injury  is 
occasioned  by  defective  machinery. 

(c)  By  the  "Norris  Law"  of  1910,  which  applies  to 
all  occupations,  and  which,  while  it  does  not  specifically 
abolish  the  defenses  of  "assumed  risk"  and  "fellow  ser- 

36 


vant,"  and  still  adheres  to  the  doctrine  that  fault  or 
negligence  is  the  only  basis  of  recovery,  so  modifies  the 
above  named  defenses  as  to  allow  a  recovery  for  prac- 
tically all  injuries  received  by  an  employe  in  the  course 
of  his  employment,  except  such  as  result  from  the  use 
of  simple  tools  or  solely  from  the  negligence  of  the 
injured  employe. 

3.  The  Workmen's  Compensation  Law  advances  a 
step  beyond  the  "Norris  Law"  and  establishes  a  new 
method  of  compensation,  and  a  rule  of  liability  unknown 
to  the  common  law,  by  which  it  is  sought  to  provide  a 
limited  compensation  for  every  injury  received  by  an 
employe  in  the  course  of  his  employment,  which  has  not 
been  intentionally  self-inflicted. 

(a)  By  creating  an  insurance  fund  from  which  a 
limited  compensation  will  be  made  for  injuries  received 
by  employes  of  such  employers  as  come  within  the 
purview  of  the  act,  and  who  elect  to  pay  the  premiums 
fixed  for  such  insurance  fund,  and  otherwise  observe 
the  laws.  The  injured  employe,  in  such  cases,  must 
report  to  the  insurance  fund  for  compensation  and  can- 
not maintain  a  civil  action  against  his  employer.  The 
dependents  of  a  killed  employe  are  provided  for  in  the 
same  way. 

(b)  By  specifically  abolishing  the  "assumed  risk," 
"fellow  servant"  and  "contributory  negligence"  de- 
fenses as  to  such  employers  as  come  within  the  purview 
of  the  act,  and  who  do  not  elect  to  pay  the  premiums 
fixed  for  the  state  insurance  fund.  In  actions  against 
such  employers  not  more  than  $12,000.00  can  be  re- 
covered for  wrongful  death,  and  there  is  no  limitation 
on  the  amount  of  damages  for  injury,  that  being  left  to 
the  sound  discretion  of  the  jury  in  each  particular  case. 

In  a  bulletin  issued  by  the  Michigan  Industrial  Accident 
Board,  under  the  title  of  "Workmen's  Compensation  Law," 
the  following  explanation  is  made  by  the  Michigan  Industrial 
Commission : 

86 


The  distinguishing  feature  of  the  compensation  law 
is  that  it  provides  benefits  for  every  injury  regardless 
of  fault  or  negligence.  The  Michigan  law  pays  the  in- 
jured employe,  beginning  the  third  week  of  the  disa- 
bility, 50  per  cent  of  his  earnings  during  such  disability. 
The  employe,  therefore,  in  reality  bears  part  of  the  cost 
of  such  compensation,  because  under  the  common  law, 
if  any  recovery  was  had,  his  damages  were  assessed  on 
the  basis  of  100  per  cent  of  his  earnings.  He  also  con- 
tributes in  the  sense  that  he  gets  no  compensation  for 
the  first  two  weeks  of  his  disability  unless  incapacity 
should  extend  eight  weeks,  in  which  event  payment 
reverts  to  first  day  of  injury. 

The  law  is  compulsory  as  to  the  state,  and  counties, 
cities,  incorporated  villages,  townships  and  school  dis- 
tricts, and  all  employes  of  the  state  and  of  such  munici- 
palities, but  this  does  not  include  employes  of  contrac- 
tors engaged  in  performing  work  for  the  state  or  any 
such  municipality. 

It  is  optional  as  to  all  private  employers  (including 
public  service  corporations)  and  their  employes  except 
that  it  contains  a  qualifying  section  governing  em- 
ployers and  workmen  engaged  in  interstate  commerce. 
In  his  speech  on  "Employers'  Liability  and  Workmen's 
Compensation"  (S.  5382)  April  8,  1912,  United  States  Senator 
George  E.  Chamberlain  of  Oregon  said : 

It  is  pretty  generally  conceded  by  the  employers  in 
almost  every  industry  that  such  legislation  in  some  form 
or  other  is  just,  as  an  instrumentality  to  put  an  end  to 
uncertainty  and  to  fix  the  extent  of  liability  for  all 
classes  of  occupational  injuries;  and  some  employers, 
without  any  legislation,  have  voluntarily  adopted  some 
form  of  compensation  for  injured  employes.  It  is  de- 
manded by  most  of  the  employes  in  hazardous  employ- 
ments, in  the  hope  that  they  may  feel  assured,  in  case 
of  accident,  that  they  will  not  become  dependent  and 
that  their  families  and  dependents,  in  case  death  results 

87 


from   such   accident,   will   not  become   the   objects   of 
public  or  private  charity. 

As  the  subject  comes  to  be  better  understood  it  will 
eventually  be  demanded  by  both  employers  and  em- 
ployes, in  order  that  the  antagonisms  which  the  present 
liability  laws  occasion  may  be  alleviated  by  a  statute 
which  fixes  the  rights  and  responsibilities  of  both  with- 
out regard  to  fault  upon  the  part  of  either.  It  is  de- 
manded by  justice,  as  well  as  by  a  sound  public  policy. 
United  States  Senator  George  Sutherland,  of  Utah,  speak- 
ing on  the  same  measure,  April  16,  1912,  said: 

The  general  principle  in  this  bill  upon  which  com- 
pensation is  based,  I  may  illustrate  in  this  way:   A  man 
who  goes  to  work  in  one  of  those  dangerous  employ- 
ments and  the  employer  who  invests  his  money  may 
be  regarded  as  joint  adventurers  in  an  industry  in  which 
a  certain  number  of  accidents  are  inevitable.    When  an 
accident  occurs,  we  propose  to  compel  the  man  who  has 
invested  his  capital  for  the  sake  of  the  profits  he  may 
make  to  continue  to  pay  the  injured  man  half  wages, 
notwithstanding  the  fact  that  he  gets  no  service  from 
the   man;  but  the   workman   himself  was   a  joint   ad- 
venturer in  the  enterprise;  he  has  invested  his  work  in 
that  dangerous  enterprise  for  the  sake  of  the  wages. 
So  we  have  him  lose  half  his  wages  while  he  is  doing 
nothing,  and  we  compel  the  employer  to  contribute  half 
of  the  wages  without  getting  anything  in  return. 
Pursuant  to  Joint  Resolution  No.  41    (approved  June  25, 
1910),  President  William  Howard  Taft  appointed  an  "Em- 
ployers' Liability  and  Workmen's  Compensation  Commission." 
This  commission  drafted  a  bill  to  give  statutory  effect  to  its 
conclusions,  now  known  as  S.  5382,  under  the  following  title : 
"A  bill  to  provide  an  exclusive  remedy  and  compensation 
for  accidental  injuries,  resulting  in  disability  or  death,  to  em- 
ployes of  common  carriers  by  railroads  engaged  in  interstate 
or  foreign  commerce,  or  in  the  District  of  Columbia,  and  for 
other  purposes." 

38 


In  his  message  transmitting  the  report  of  this  commission 
to  the  Senate  and  House  of  Representatives,  under  date  of 
February  20,  1912,  President  Taft  said : 

One  of  the  great  objections  to  the  old  common  law 
method  of  settling  questions  of  this  character  was  the 
lack  of  uniformity  in  the  recoveries  made  by  injured 
employes,  and  by  the  representatives  of  those  who  suf- 
fered death.  Frequently  meritorious  cases  that  appealed 
strongly  to  every  sense  of  human  justice  were  shut  out 
by  arbitrary  rules  limiting  the  liability  of  the  employer. 
On  the  other  hand,  often  by  perjured  evidence  and  the 
undue  emotional  generosity  of  the  jury,  recoveries  were 
given  far  in  excess  of  the  real  injury,  and  sometimes  on 
facts  that  hardly  justified  recovery  at  all.  Now,  under 
this  system  the  tendency  will  be  to  create  as  nearly  a 
uniform  system  as  can  be  devised ;  there  will  be  re- 
coveries in  every  case,  and  they  will  be  limited  by  the 
terms  of  the  law  so  as  to  be  reasonable. 

The  great  injustice  of  the  present  system,  by  which 
recoveries  of  verdicts  of  any  size  do  not  result  in  actual 
benefit  to  the  injured  person  because  of  the  heavy  ex- 
pense of  the  litigation  and  the  fees  charged  by  the  coun- 
sel for  the  plaintiff,  will  disappear  under  this  new  law, 
by  which  the  fees  of  the  counsel  are  limited  to  a  very 
reasonable  amount.  The  cases  will  be  disposed  of  most 
expeditiously  under  this  system,  and  the  money  will  be 
distributed  for  the  support  of  the  injured  person  over 
a  number  of  years,  so  as  to  make  its  benefit  greater  and 
more  secure. 

Of  course  the  great  object  of  this  act  is  to  secure  jus- 
tice to  the  weaker  party  under  existing  modern  condi- 
tions, but  a  result  hardly  less  important  will  follow 
from  this  act  that  I  cannot  fail  to  mention. 

The  administration  of  justice  today  is  clogged  in 
every  court  by  the  great  number  of  suits  for  damages 
for  personal  injury.  The  settlement  of  such  cases  by 
this  system  will  serve  to  reduce  the  burden  of  our 
courts  one-half  by  taking  the  cases  out  of  court  and 

39 


disposing  of  them  by  this  short  cut.  The  remainder  of 
the  business  in  the  courts  will  thus  have  greater  atten- 
tion from  the  judges,  and  will  be  disposed  of  with  much 
greater  dispatch.  In  every  way,  therefore,  the  act  de- 
mands your  earnest  consideration,  and  I  sincerely  hope 
that  it  may  be  passed  before  the  adjournment  of  this 
session  of  Congress. 

LIMITATION  ON  COMPULSORY  STATUTORY  COM- 
PENSATION:   FAULT  OF  EMPLOYE 

In  discussing  the  necessity  of  guarding  against  the  evils  of 
malingering  and  carelessness  on  part  of  employes,  in  enacting 
compulsory  statutory  compensation  laws,  the  human  element 
was  declared  to  be  the  dominating  factor. 

To  offer  compulsory  statutory  compensation  for  loss  of 
earning  power  caused  by  industrial  injuries,  regardless  of  the 
fault  of  the  injured  workman,  is  to  offer  a  premium  for  suc- 
cessful malingering,  carelessness  and  fraud.  At  this  point 
sympathy  must  be  restrained  by  justice  if  manly  independence 
and  the  nobility  of  self-respect  are  to  be  safeguarded,  and  em- 
ployers, industries  and  society  are  to  be  safeguarded  from 
burdens  imposed  by  impostors. 

The  principles  of  justice  require  that  employers  shall  be 
liable  for  injuries  caused  by  their  wilful  misconduct,  and  that 
employes  shall  not  be  compensated  for  injuries  caused  by  their 
own  misconduct. 

The  Ohio  Workmen's  Compensation  Law  provides  that  **no 
compensation  shall  be  paid  for  purposely  self-inflicted  injuries 
and  that  the  employer  shall  not  be  liable  to  respond  in 
damages  if  the  injury  or  death  of  the  employe  was  due  to 
the  absence  of  any  guard  or  other  device  required  by  law  for 
the  safety  of  persons,  if  the  absence  of  such  guard  or  device 
be  due  to  the  removal  thereof  by  the  injured  workman  him- 
self or  with  his  knowledge  by  any  of  his  fellow  workmen, 
unless  such  removal  be  by  order  of  the  employer,  his  officer 
or  agent." 

The  Michigan  law  provides  that:  "No  employe  shall  be 
eligible  for  compensation  if  it  is  proved  that  the  injury  resulted 

40 


from  the  deliberate  intention  of  the  employe  to  cause  the 
injury  or  if  the  injury  results  after  the  employe  has  left  the 
plant,  or  quits,  or  is  properly  discharged  from  the  service.  Em- 
ployes whose  service  is  of  a  casual  or  incidental  character  are 
not  eligible  for  benefits." 

The  elective  form  of  the  Model  Workmen's  Compensation 
act  proposed  by  the  Committee  for  Accident  Prevention  and 
Workmen's  Compensation  of  the  National  Association  of 
Manufacturers  of  U.  S.  A.  excludes  employes  from  receiving 
compensation  in  the  following  language : 

Provided  that  no  compensation  shall  be  paid  where 
such  injury  or  death  is  intentionally  self-inflicted  or  due 
to  the  intoxication  of  the  employe  or  his  wilful  failure 
or  refusal  to  use  a  safety  appliance  provided  by  the  em- 
ployer or  his  refusal  or  neglect  to  perform  a  statutory 
duty. 
In  the  compulsory  form,  proposed  by  this  committee,  the 
corresponding  provision  is: 

Section  2.     No  workman  shall  be  compensated  for 
injury  wilfully  self-inflicted,  or  due  to  his  own  intoxica- 
tion, or  his  wilful  failure  or  refusal  to  use  a  safety  ap- 
'pliance  provided  by  the  employer,  or  to  a  wilful  viola- 
tion of  any  statutory  duty;  but  the  burden  of  proving 
such  failure  shall  be  upon  the  employer. 
The  tentative   drsift  of  a  compulsory  uniform   workmen's 
compensation  act,  framed  by  a  "Special  Committee  of  the  Con- 
ference of  Commissioners  on  Uniform  State  Laws,"  contains 
the  following: 

Section  3.  Injuries  not  covered.  .No  compensation 
shall  be  allowed  for  an  injury  caused  (1)  by  the  em- 
ploye's wilful  intention  to  injure  himself  or  to  injure 
another,  or  (2)  by  his  intoxication. 

Section  59.  Definitions,  (e)  The  words  "personal 
injury  arising  out  of  and  in  the  course  of  such  employ- 
ment" shall  not  include  an  injury  caused  by  the  wilful 
act  of  a  third  person  directed  against  an  employe  for 
reasons  personal  to  such  employe  or  not  directed  against 
him  as  an  employe  because  of  his  employment.    They 

41 


shall  not  include  a  disease  except  as  it  shall  result  from 
the  injury. 

Note:    This  is  substantially  the  same  as  the  language 
used  in  the  Federal  bill,  now  before  Congress  (S.  5382). 
In  New  Hampshire,  New  Jersey  and  Kansas  intoxica- 
tion is  a  bar  to  compensation.     In  New  Jersey,  Illinois, 
Kansas,  Ohio  and  Washington  compensation  is  barred 
if  the  employe  intended  to  cause  the  particular  injury 
in  question. 
The  bill  proposed  by  the  ''United  States  Employers'  Lia- 
bility and  Workmen's  Compensation  Commission,"  (S.  5382,) 
introduced  in  the  United  States  Senate  by  the  Hon.  George 
Sutherland  of  Utah,  chairman,  and  in  the  House  of  Repre- 
sentatives by  the  Hon.  W.  G.   Brantley  of  North   Carolina, 
vice-chairman  of  the  Commission,  contains  the  following  pro- 
vision : 

Section  6.  That  no  compensation  shall  be  allowed 
for  the  injury  or  death  of  an  employe  when  it  is  proved 
that  his  injury  or  death  was  occasioned  by  his  wilful 
intention  to  bring  about  the  injury  or  death  of  himself 
or  of  another,  or  that  the  same  resulted  from  his  in- 
toxication while  on  duty. 
A  writer  attacked  this  bill  in  the  Charlotte  (N.  C.)  News, 
June  27,  1912.    In  referring  to  this  Section  6,  he  said : 

In  no  case  of  wilful  killing  or  death  by  intoxication 
would  an  employer  be  liable.     The  bill  puts  a  drunken 
man  further  out  of  the  pale  of  protection  than  the  lower 
animals,  and  gives  employers  license  to  murder  in  the 
name  of  drunkenness. 
Representative  Brantley  answered  this  attack  in  the  Char- 
lotte News  for  August  5,  1912.    After  quoting  the  full  text  of 
this  Section  6,  Mr.  Brantley  says : 

Does  the  writer  of  the  article  contend  that  if  it  is 
proven  that  a  railroad  employe  deliberately  commits 
suicide,  or  attempts  to  do  so,  that  the  railroad  company 
should  pay  compensation  to  him?  If  some  one  else  is 
injured  as  the  result  of  the  employe's  intoxication  while 
on  duty,  compensation  will  be  paid  under  the  bill.    The 

42 


bar  is  put  upon  the  intoxicated  man.  Does  the  writer 
of  the  article  think  that  the  sober  man  and  the  drunken 
man  should  be  treated  alike?  Does  not  he  know  that 
the  present  liability  law  distinguishes  between  them 
and  that  the  compensation  bill  makes  no  change  in  that 
regard?  Does  not  he  think  that  the  public  has  sub- 
stantial rights  in  the  premises?  Would  he  by  law  de- 
clare a  reward  to  the  drunken  man  whose  drunkenness 
injures  him  while  destroying  the  lives  of  others?  The 
public  has  rights  that  must  be  considered  by  the  law- 
makers. In  all  the  many  hearings  before  the  commis- 
sion the  labor  men  present  made  no  such  objection  to 
Section  6  of  the  bill  as  the  article  in  question  makes. 
The  suggestion  in  this  article  that  Section  6  of  the  bill 
will  "give  employers  license  to  murder  in  the  name  of 
drunkenness"  reflects  no  credit  upon  the  intelligence  or 
fair-mindedness  of  the  author  and  suggests  a  purpose  in 
his  mind  that  is  far  and  apart  from  any  interest  in  rail- 
road employes. 

TENDENCY      OF     EMPLOYERS'     LIABILITY     AND 
WORKMEN'S   COMPENSATION   LEGISLATION 
IN  THE  UNITED  STATES  AND  FOR- 
EIGN COUNTRIES 

Legislation  on  these  subjects  is  world-wide.  It  has  been 
developing  for  nearly  a  century.  It  is  being  urged  in  many 
states  with  the  cumulative  force  of  past  experience  and  suc- 
cessful progress. 

UNITED  STATES 

A  memorandum  showing  the  law  and  conditions  in  the 
United  States,  Germany  and  England,  relating  to  employers' 
liability  and  workmen's  compensation,  by  Mr.  Launcelot 
Packer,  Secretary  of  the  "United  States  Employers'  Liability 
and  Workmen's  Compensation  Commission,"  is  published  as  an 
appendix  to  the  Report  of  the  Commission  (Senate  Document 
No.  338),  February  21,  1912.  In  speaking  of  the  present  ten- 
dency of  negligence  legislation  in  the  United  States,  Mr. 
Packer  says: 

4S 


The  trend  of  recent  legislation  and  attempted  legis- 
lation throughout  the  country,  until  the  introduction 
of  so-called  compensation  laws,  has  been  to  make  the 
master  liable  for  all  accidents  that  arise  in  the  business, 
due  to  negligence  of  anyone  in  his  service;  to  change 
the  burden  of  proof  so  as  to  require  the  master,  where 
defects  exist,  to  show  that  there  was  no  negligence,  and 
also  to  change  the  burden  of  proof  so  as  to  require  the 
master  to  show  that  the  injured  employe  was  negligent ; 
to  remove  all  limits  whatsoever  that  exist  upon  his  lia- 
bility, leaving  him  open  to  such  damages  as  the  juries 
may  see  fit  to  assess,  without  any  certainty  of  what  such 
damages  may  cost  him  at  any  moment;  to  require  all 
questions  of  negligence  to  be  left  to  the  jury ;  to  prohibit 
any  contracting  out  of  such  liability;  and  to  increase 
the  body  of  law  aimed  directly  at  preventing  accident. 

Verdicts  have  been  growing  in  amount  until  some 
have  become  greatly  excessive,  though  others  are  in- 
adequate. 
Discussing  this  element  of  the  general  subject,  Mr.  New- 
berry says: 

At  common  law,  liability  of  an  employer  to  a  work- 
man injured  in  his  employment  rests  solely  upon  negli- 
gence of  the  former.  Unless  the  employer  has,  either 
by  commission  of  some  positive  act  or  omission  of  some 
proper  safeguard,  caused  the  injury,  he  is  not  liable  for 
its  result.  In  recent  years  this  rule  has  been  so  modified 
that  in  many  states  the  negligence  of  an  employe,  if 
in  a  position  superior  to  that  of  the  man  injured,  is  con- 
sidered negligence  of  the  employer,  so  that  the  one 
whose  lack  of  care  caused  the  accident  represents  the 
employer,  and  the  latter  suffers  for  the  former's  fault. 
It  is  manifest  that  one  who  has  made  every  effort  to 
safeguard  his  works,  by  using  the  best  material  obtain- 
able, by  erecting  all  safeguards  and  protection  known 
in  that  particular  business,  and  by  using  reasonable 
care  in  engaging  workmen,  should  not  be  responsible 
for  injuries  which  he  cannot  foresee  nor  guard  against. 

44 


It  is  difficult  to  safeguard  a  large  works  against  any 
possible  accident,  and  a  jury  is  apt,  through  natural 
sympathy  with  an  injured  man,  to  be  severe  on  an  em- 
ployer and  hold  him  bound  to  what  seems  an  unreason- 
able degree  of  care.  Juries  being  judges  of  the  facts, 
courts  will  not  overrule  their  decisions,  on  questions  of 
fact,  unless  manifestly  against  the  weight  of  the  evi- 
dence. The  employer  is  therefore  generally  compelled 
to  rely  on  defenses  to  such  an  action,  the  principal  of 
which  are  the  following: 

First.  That  the  accident  was  caused  by  the  negli- 
gence of  a  fellow  servant  of  the  same  grade  as  the  in- 
jured man. 

Second.  That  the  injury  was  caused  by  contributory 
negligence  of  the  injured  man.  That  is,  that  though  the 
employer  was  negligent,  the  injured  man  was  also  neg- 
ligent, that  without  his  negligence  the  accident  would 
not  have  happened. 

Third.  That  the  injury  happened  through  inherent 
risk  in  the  nature  of  the  employment,  or  that  the  em- 
ploye either  expressly  or  impliedly  assumed  the  risk. 

GERMANY 

Mr.  Packer  states  that  ^'Germany  was  the  first  country  to 
deal  effectively  with  accidents."  The  movement  began  in 
Prussia  in  1838.    He  also  says: 

On  the  constitution  of  the  German  Empire,  in  1871, 
the  Prussian  law  as  to  railroads  was  adopted  under  the 
German  Imperial  Employers'  Liability  Act  of  1871.  At 
the  same  time  a  similar  need  was  felt  for  more  effective 
remedies  in  consequence  of  the  development  of  the  fac- 
tory system  and  in  the  dangerous  trades,  so  a  step  was 
taken  increasing  the  responsibility  of  the  employer  to 
include  the  acts  of  his  superintending  agents  (though 
not  of  lower  grade  employes)  in  mines,  quarries,  pits, 
or  factories,  thus  adopting  to  this  extent  the  French  and 
English  law  of  agency.  This  changed  the  pre-existing 
law,  under  which  the  master  was  responsible  only  for 

45 


his  own  negligence,  but  left  proof  of  negligence  neces- 
sary in  those  undertakings. 

The  next  step  was  an  endeavor  to  meet  the  problem 
by  combining  the  idea  of  extended  liability  with  that 
of  insurance.  This  was  done  under  Section  4  of  the 
Imperial  Employers'  Liability  law  of  1871  by  reducing 
the  amount  of  the  employer's  damages  to  the  extent  of 
any  insurance  paid  to  the  injured  man  if  the  employer 
contributed  one-third  to  the  premium  on  that  insurance. 

This  employer's  liability  law  still  left  uncovered  that 
large  class  of  injuries  caused  by  chance,  and  those 
caused  by  fellow  servants;  it  resulted  in  an  increased 
number  of  lawsuits,  seriously  embittering  the  relations 
between  employer  and  employed,  and  caused  vast  ex- 
'  penditures  for  litigation  that  should  have  been  spent 
directly  for  the  benefit  of  the  injured  employes. 

The  evidence  was  overwhelming  that  in  the  past  indi- 
vidual workers  in  the  less  favorable  industries  had 
borne  a  burden  of  risks  cruelly  disproportionate  to  any- 
thing that  fair  dealing  would  dictate — under  the  steady 
increase  of  danger  resulting  from  the  change  from  an 
agricultural  to  an  industrial  population — and  resulting 
from  the  fact  that  to  obtain  redress  not  only  was  negli- 
gence necessary,  but  the  burden  of  proof  of  that  negli- 
gence was  upon  the   employe. 

This  resulted  in  it  being  made  clear  that  the  law 
would  have  to  be  amended,  and  there  is  no  doubt  that 
the  existing  employers'  liability  law  would  have  been 
made  more  stringent,  entailing  a  further  burden  upon 
the  employer,  if  the  views  of  distinguished  economists 
had  not  been  adopted.  These  views  pointed  out  that 
waste  in  litigation  under  the  law  of  negligence  was  in- 
evitable, and  advocated  a  law  requiring  indemnification 
of  all  accidents  without  inquiry  into  the  question  of 
cause. 

Finally  the  views  of  the  economists  were  adopted 
that  the  plain  practical  exigencies  of  the  safety  of  the 
laborers  was  the  vital   question,   and   that   legislation 

46 


should  be  based  upon  statistical  material  rather  than 
upon  doctrine. 

Elaborate  proof  showed  that  a  large  class  of  work- 
men in  misfortune  are  reduced  to  pauperism,  and  do  not 
insure,  that  the  classes  needing  insurance  required  com- 
pulsion, the  evidence  being  that  if  left  to  individual 
iniative,  or  to  the  common  labor  contract,  or  even  to 
"local  statute"  insurance  was  not  effected  (written). 
Employers  (and  the  townships  alike)  urged  "competi- 
tion" as  a  reason  for  failure  to  insure  their  employes, 
unless  the  Government  dictated  uniform  conditions 
for  all. 

Insurance  Law  Evolved. — Therefore,  to  revive  the 
old  feeling  of  fellowship  between  employers  and  the 
working  population,  the  idea  found  in  the  old  German 
law  notions,  exemplified  by  the  mining  industry  of  500 
years  before,  was  generalized,  and  there  was  evolved 
the  compulsory  accident  insurance  law  of  1884,  and  the 
workmen  have  been  entitled  to  fixed  compensation  for 
injuries  without  being  required  to  furnish  proof  of 
negligence  since. 

The  accident  law  was  the  first  introduced,  but  failed 
of  passage  until  after  the  passage  of  the  sickness  in- 
surance law  of  1883,  with  which  it  was  intimately  re- 
lated. 
Regarding  the  eflfect  on  litigation  of  complsory  statutory 

compensation,  regardless  of  the  fault  of  the  workman,   Mr. 

Packer,  quotes  Dr.   Ludwig  Lass,  an  imperial  councilor,  as 

follows : 

As  to  paying  for  the  accidents  caused  by  the  negli- 
gence of  the  injured,  Dr.  Ludwig  Lass,  an  imperial 
councilor,  pionts  out  that  the  real  art  of  legislation  is  to 
prevent  litigation  which  is  an  evil  to  society.  Paying 
for  these  accidents  prevents  the  natural  attempt  of  the 
employer  in  most  cases  to  prove  disobedience  to  regu- 
lations or  recklessness,  and  thereby  increase  Htigation. 
Recklessness  on  the  part  of  the  employes  is  prevented 
by  instruction,  careful  control,  fines,  and  dismissal. 

47 


ENGLAND 

Writing  on  the  employers'  liability  and  workmen's  compen- 
sation law  of  England,  Mr.  Packer  says : 

In  England  the  development  of  law  regulating  acci- 
dents of  industry  is  based  on  and  is  illustrated  by  two 
views,  one  held  under  the  early  negligence  basis  and  the 
other  under  the  compensation  law,  respectively,  viz.,  the 
view  enunciated  in  1837  (Priestley  v.  Fowler,  3  Mees 
and  W.,  1),  that  "principles  of  justice  and  good  sense 
require  that  a  workman  should  take  on  himself  all  the 
ordinary  risks  of  his  employment,"  and  the  view  held  in 
1897  that  "sound  economic  doctrine  requires  that  the 
employer  shall  take  all  the  ordinary  and  extraordinary 
risks  involved  in  the  carrying  on  of  his  industry,"  it 
being  in  1897  that  England  adopted  a  system  of  com- 
pensating accidents  of  industry  without  regard  to  cause 
and  discarded  the  negligence  basis  for  dealing  with 
them  which  was  then  operative.  In  England,  as  in 
this  country,  industrial  accidents  were  originally  dealt 
with  under  the  common  law  of  negligence.  The  fellow- 
servant  rule  had  been  adopted  in  1837  in  the  case  of 
Priestley  v.  Fowler,  supra,  and  the  doctrine  of  assump- 
tion of  risk  and  volenti  non  fit  injuria,  together  with 
the  doctrine  of  contributory  negligence,  were  valid 
defenses  to  claims. 

The  German  insurance  laws  had  therefore  been  in 
force  thirteen  or  fourteen  years  before  England  adopted 
the  principle  of  compensation,  and  when  it  finally  did 
so  its  law  took  a  very  different  form  from  that  of  the 
German  law,  in  that  it  proceeded  on  more  individualistic 
lines.  In  England  each  individual  employer  was  simply 
required  to  pay  his  own  workmen  in  case  of  accidents 
a  definitely  ascertained  and  predetermined  sum,  irre- 
spective of  negligence,  in  just  the  same  way  as  the  law 
had  made  him  in  certain  cases  liable  to  pay  his  work- 
men before  this  compensation  law  was  adopted,  an  in- 
definite sum,  viz.,  such  a  sum  as  a  jury  might  assess 

48 


after  trial  in  such  cases  as  he  could  be  proved  to  have 
been  negligent.  The  English  compensation  law  also 
left  it  to  the  individual  initiative  of  the  employer  in  each 
case  to  make  his  ow^n  provision  for  the  payment  of  this 
definitely  ascertained  compensation,  in  the  same  w^ay  as 
the  law  had  before  left  it  to  his  individual  initiative  to 
make  provision  for  the  payment  of  the  indefinite  dam- 
ages that  might  be  assessed  against  him  by  a  jury  under 
the  negligence  law,  while  in  Germany  he  was  compelled 
to  join  an  insurance  association. 

The  English  system  was  advocated  by  Mr.  Chamber- 
lain, the  author  of  the  workmen's  ^compensation  legisla- 
tion and  a  man  who  had  had  a  long  practical  experience 
as  a  manufacturer  himself,  as  being  far  better  adapted 
to  English  institutions  than  the  German  system  which 
was  too  elaborate  and  bureaucratic  for  English  people; 
the  expediency  of  this  view  was  acknowledged  when 
the  law  adopting  the  same  principle  was  extended  in 
1906  to  practically  every  employment. 
Continuing  his  explanation  of  the  English  law,  Mr.  Packer 
says: 

The  Common  Law. — In  England  the  common  law  de- 
fenses were  pressed  even  more  strongly  against  the 
workman  than  in  the  United  States;  the  common  law 
in  England,  according  to  the  statement  of  Mr.  Dobson 
on  the  introduction  of  the  employers'  liability  act  of 
1880,  "had  ended  in  giving  the  workmen  no  compensa- 
tion at  all  unless  they  could  trace  the  accident  to  per- 
sonal' negligence  on  the  part  of  the  employer." 

Employers'  Liability  Act  of  1880. — It  was  claimed  by 
the  opponents  of  the  bill  which  became  the  employers' 
liability  act  of  1880  that  if  passed  it  would  result  in  the 
ruin  of  industries. 

The  employers'  liability  act  of  1880  having  produced  a 
large  crop  of  litigation  and  failing  to  reach  a  great  num- 
ber of  accidents,  a  bill  was  introduced,  in  1893,  known 
as  the  Asquith  bill,  by  Mr.  Asquith,  now  Prime  Minis- 
ter of  England. 

49 


The  Asquith  Bill. — The  principle  of  the  Asquith  bill 
was  that  ''if  a  man  for  his  own  profit  sets  on  foot  in- 
dustrial operations,  he  ought  to  be  made  responsible  for 
the  selection  of  his  servants  and  the  supervision  of  his 
business." 

This  bill  went  almost  to  the  limit  of  the  neghgence 
basis  for  dealing  with  accidents  in  that  it  abolished  en- 
tirely the  doctrine  of  fellow  service  and  the  limit  of 
damages,  and  it  prohibited  contracting  out,  leaving, 
however,  contributory  negligence  and  assumption  of 
risk  defenses  operative. 

Mr.  Chamberlain,  then  a  member  of  the  opposition 
(the  Conservative  party),  proposed  an  amendment  to 
the  bill  embodying  the  principle — 

"That  no  change  in  the  law  will  be  final  or  satisfac- 
tory which  does  not.  provide  compensation  for  all  in- 
juries in  the  ordinary  course  of  employment  not  caused 
by  the  injured's  own  act  or  default." 

This  was  only  tentative,  however,  and  was  withdrawn. 
Continuing  the  development  of  the  English  law  Mr.  Packer 
writes,  regarding  the  "Workmen's  Compensation  Act  of  1897" 
as  follows : 

In  1897  the  conservative  government  introduced  the 
workmen's  compensation  act,  saying: 

"The  present  law  is  notoriously  inadequate;  it  fails 
to  compensate  for  accidents  if  caused  by  fellow  servants, 
if  contributed  to  by  the  injured,  and  if  resulting  from 
the  risks  of  occupation ;  it  causes  costly  litigation,  35 
per  cent  of  the  amount  recovered  being  legal  expense ; 
it  leaves  the  employer  ignorant  of  what  his  liability  is." 

The  government  criticised  the  Asquith  bill,  saying 
that  such  negligence  legislation  rendered  proof  of 
negligence  necessary,  which  meant  increased  litigation, 
and  such  a  law  would  still  reach  only  50  per  cent  of  the 
accidents  that  happen. 

The  government  admitted  the  principle  was  new, 
based  on  the  doctrine  that — 

50 


**when  a  person  on  his  own  responsibility  and  for  his 
own  profit  sets  in  motion  agencies  which  create  risks  for 
others,  he  ought  to  be  civilly  responsible  for  the  conse- 
quences." 

But  in  applying  this  and  granting  compensation  it 
was  the  general  opinion  that  a  limit  of  liability  should 
be  adopted  with  it. 

Mr.  Asquith,  who  was  then  in  the  opposition,  ad- 
mitted the  principle  of  universal  compensation  and  of 
giving  some  solatium  for  a  pure  accident,  the  result  of 
no  negligence,  to  soldiers  in  the  army  of  industry,  and 
that  it  was  revolting  to  sentiment  and  judgment  alike 
that  men  who  met  with  accident  through  the  necessary 
exigencies  of  daily  occupation  should  be  a  charge  upon 
their  families. 

Mr.  Chamberlain,  in  admitting  that  the  principle  was 
new  and  only  applicable  if  "a  great  human  interest  is 
involved,"  said  that  the  bill  dealt  with  a  great  scandal, 
not  with  absolute  rights,  but  with  questions  of  humanity 
and  expediency.     He  said  it  contained  two  principles: 

(1)  That  a  workman  was  entitled  for  all  accidents 
of  occupation  to  a  moderate  and  reasonable  compensa- 
tion. 

(2)  That  the  compensation  should  be  a  charge  on 
the  trade,  like  repair  of  machinery. 

Lord  Salisbury  said  there  was  a  proper  distinction 
between  state  interference  when  saving  life,  as  against 
saving  property,  and  that  the  bill  was  a  part  of  a  series 
of  old  factory  legislation  preventing  disease  and  death. 
He  said  that  the  history  of  the  law  of  compensation  was 
the  history  of  a  great  machinery  for  saving  life. 

Mr.  Ruegg,  a  leading  English  lawyer  and  writer  on 
this  subject,  states  that  fhe  principle  of  the  bill  is  that 
"the  pecuniary  results  from  loss  of  life  incident  to  the 
carrying  on  of  industrial  enterprises"  should  be  re- 
garded as  a  ''part  of  the  expense  of  production";  that 
the  employer  who  initiates  it  should,  for  conscience 
sake,  pay  this  expense  in  the  first  instance  that  "ulti- 

51 


mately  it  will  be  paid  by  the  community"  for  whose 
use  and  enjoyment  industry  is  carried  on. 

Scope  of  the  Bill. — As  the  bill  involved  a  new  prin- 
ciple and  was  a  tentative  measure,  it  was  limited  to  the 
more  dangerous  industries,  viz.,  to  employment  on,  or 
in  or  about  a  railway,  mine,  quarry,  or  engineering  work, 
and  building  which  exceeds  30  feet  in  height  (an  arbi- 
trary line  based  on  the  factory  act). 

It  made  the  employer  responsible  to  his  employes  for 
all  accidents  with  two  exceptions: 

(1)  Those  due  to  ''the  serious  and  wilful  misconduct 
on  the  part  of  the  injured  employe." 

(2)  Except  for  "the  first  two  weeks'  disablement 
after  any  accident." 

There  were  three  tests  of  the  scope  of  this  bill,  viz., 
(1)  risk,  (2)  capital  in  industry,  (3)  insurance  feasi- 
bility. 

It  was  admitted  that  when  experience  had  proved 
that  there  was  no  injury  to  the  trades  covered,  such  ex- 
perience would  be  an  unanswerable  argument  in  favor 
of  the  extension  of  the  scope  of  the  bill. 
The  "Negligence  Remedy"  as  defined  and  limited  in  this 
bill,  is  summarized  by  Mr.  Packer  as  follows : 

It  was  intended  to  restrict  tjie  use  of  the  negligence' 
remedy  in  the  trades  to  which  the  compensation  act  ap- 
plied, and  words  were  inserted  in  that  act  to  limit  the 
right  of  suit  under  the  negligence  law  to  cases  in  which 
there  was  moral  blame  on  the  part  of  the  employer, 
namely,  to  cases  where  there  was  deliberate  and  pe- 
culiar negligence  attributable  to  him,  such  as  would 
correspond  to  the  serious  and  wilful  misconduct  which 
deprived  the  employe  of  compensation  under  the  act. 
There  was  very  little  incentive  to  use  the  negligence 
remedy,  however,  as  the  common  law  in  England  gave 
practically  no  rights,  and  the  employers'  liability  act 
limited  the  amount  of  compensation  to  three  years' 
wages,  while  under  the  compensation  act  the  disable- 
ment benefits  continued  as  long  as  the  disablement     In 

52 


addition  to  that  the  defenses  of  assumption  of  risk,  con- 
tributory negligence,  and  fellow  service  might  defeat 
the  negligence  claim. 

Serious  and  Wilful  Misconduct. — Having  left  the 
negligence  remedies  in  order  to  penalize  the  employer 
where  grossly  negligent,  the  employe  was  similarly  pen- 
alized, by  losing  his  compensation  if  the  accident  was 
due  to  his  serious  and  wilful  misconduct;  although  it 
was  admitted  that  going  into  the  question  of  cause 
of  accident  was  contrary  to  the  principle  of  the  bill. 

Speaking  of  the  effect  of  the  enactment  of  this  measure  by 
the  English  Parliament  on  similar  legislation  in  English  col- 
onies, Mr.  Packer  says: 

The  passage  by  England  of  this  effective  but  conser- 
vative measure  was  a  declaration,  after  exhaustive  de- 
bate, of  her  legislature's  view  of  the  requirements  of  the 
existing  public  policy  in  the  treatment  of  industrial  ac- 
cidents.    It  was  shortly  afterwards  followed  by  similar 
enactments  in  her  colonies,  and  was  followed  in  1900 
by  an  act  extending  the  principle  to  agriculture. 
Building  on  the  safe  foundation  of  experience,  the  scope  of 
the  English  act  of  1897  was  extended  in  1906.     Continuing  his 
explanation  of  the  English  law  to  a  conclusion,  Mr.  Packer 
reports  that: 

In  accordance  with  the  admission  on  the  passage  of 
the  bill  that  when  experience  had  proved  that  there  was 
no  injury  to  the  trades  covered  under  it,  such  experience 
would  be  an  unanswerable  argument  in  favor  of  the 
extension  of  the  scope  of  the  1897  bill,  a  committee 
was  appointed  in  November,  1903,  by  the  Home  Secre- 
tary to  inquire  and  report  to  the  Home  Office — 

(1)  What  amendments  in  the  law  relating  to  com- 
pensation for  injuries  to  workmen  are  necessary  or  de- 
sirable ;    and 

(2)  To  what  classes  of  employment  not  now  in- 
cluded in  the  workmen's  compensation  acts  can  be 
properly  extended  with  or  without  modification. 

6S 


The  committee  was  composed  of  able  men,  represent- 
ing all  interests,  and  took  exhaustive  evidence,  making 
a  report  in  August,  1904,  which  has  been  accepted  as  a 
basis  for  future  legislation. 

As  to  exclusion  from  payment  of  accidents  caused  by 
the  "serious  and  wilful  misconduct  of  injured,"  and  of 
payment  for  the  "first  two  weeks  after  an  accident,"  the 
committee  recommended  that  no  change  be  made. 

With  a  view  to  stimulating  the  prevention  of  acci- 
dents they  recommended  that  a  workman  should  be 
allowed  to  receive  part  of  a  penalty  recovered  under  any 
criminal  enactment. 

The  evidence  as  to  the  burden  on  industry  of  the 
act  showed  that  as  moral  obligations  to  the  injured 
were  met  by  some  employers  and  not  by  others,  some 
advantage  resulted  from  the  legal  obligation  of  the  act, 
but  that  employers  desired  greater  certainty,  especially 
of  the  weekly  payments  for  permanent  injury,  which 
necessarily  accumulated  year  by  year  until  new  pen- 
sioners were  balanced  by  the  old  dropping  off. 

The  committee  concluded  that  the  evidence  showed 
that  the  burden  on  employers  had  not  been  excessive, 
but  that  it  tended  to  increase.  This  suggested  caution 
in  legislation  and  especially  in  adding  to  its  indefinite- 
ness  or  uncertainty. 

Workmen's  Compensation  Act  of  1906. — In  the 
amending  act,  known  as  the  workmen's  compensation 
act  of  1906,  in  effect  July  1,  1907,  the  chief  extensions 
of  the  scope  of  the  old  act  made  were :  Covering  all 
manual  workers  and  all  other  employes  who  earn 
$1,216.63  per  annum  or  less  (policemen  and  home  work- 
ers alone  excepted)  ;  covering  certain  trade  diseases ; 
excluding  from  ^compensation  only  the  first  seven  days 
where  the  disability  was  less  than  fourteen  days ;  re- 
stricting the  defense  of  serious  and  wilful  misconduct  to 
cases  in  which  the  injury  does  not  result  in  death  or 
serious  and  permanent  disablement;  adding  to  the 
number   of    dependent    relatives    entitled;    raising   the 

54 


maximum  allowance  of  minors  to  full  wages,  and  sub- 
sequently to  half  what  they  would  have  been  earning 
as  their  wages  advanced ;  removing  the  restriction  that 
the  accident  must  happen  "on,  in,  or  about"  the  em- 
ployer's premises ;  provisions  controlling  the  commuta- 
tions made. 

There  were  other  minor  changes  made,  but  the  prin- 
ciple of  the  act  of  1897  was  adhered  to. 

SIMILAR  LEGAL  DEVELOPMENT  IN  UNITED 
STATES  AND  ENGLAND 

An  examination  of  the  English  law  of  negligence, 
passing  through  which  there  was  evolved  the  law  of 
compensation,  shows  an  almost  exact  parallel  to  the 
development  of  the  law  of  negligence  in  this  country ; 
the  amendments  that  have  been  adopted  here  follow- 
ing the  same  course  of  development  as  the  amendments 
made  or  attempted  to  be  made  in  England,  and  thus  it 
is  clear  from  the  English  experience  that  their  com- 
pensation principle  is  adapted  to  our  system  of  laws,  and 
will  fit  the  conditions  under  which  industry  is  carried  on 
in  the  United  States. 

OTHER    COUNTRIES 

Mr.  Packer  says : 

That  England  and   Germany  do  not  stand  alone  in 

recognizing  and  dealing  with  the  present  needs  of  in- 
dustrial production  can"  be  seen  by  a  reference  to  the 

compensation  laws  passed  in  the  following  countries: 

Austria  Alberta 

Belgium  British  Columbia 

Denmark  Quebec 

Finland  Cape  of  Good  Hope 

France  Transvaal 

Germany  New  Zealand 

Greece  New  South  Wales 

Hungary  Queensland 

Great  Britain  South  Australia 
55 


Western  Australia 

Norway 

Italy 

Russia 

Luxemburg 

Spain 

Netherlands 

Sweden 

as  well  as  in  a 

few  c 

)f  the  states  of  the  United  States, 

A    LOGICAL    DEVELOPMENT 

In  concluding  his  memorandum,  Mr.  Packer  points  out  that 
each  foreign  country  has  followed  its  own  logical  develop- 
ment.    He  says : 

Germany  followed  the  logical  development  from  her 
existing  institutions,  utilizing,  as  she  did,  the  existing 
organizations  for  sickness  insurance  and  accident  insur- 
ance in  the  various  trades  and  adopting  elaborate  sys- 
tems of  regulation  to  which  her  people  are  so  thorough- 
ly accustomed.  England's  compensation  law  is  the 
logical  development  from  her  institutions  and  her 
system  of  law.  Her  empoyers'  liability  system  looked 
to  the  employer  alone  to  make  the  payments  required 
under  it,  leaving  his  insurance  to  individual  initiative. 
Each  foreign  country  has  followed  its  own  most 
logical  development,  but  practically  every  industrial 
country  of  the  world  has  discarded  the  negligence 
system  and  has  adopted  the  principle  that  every  acci- 
dent the  result  of  occupation  should  be  compensated 
without  inquiry  into  the  question  of  negligence. 

THE  LOGICAL  PRINCIPLE  FOR  THE  UNITED 
STATES 

Applying  his  conclusions  to  federal  and  state  legislation  on 
the  subject  of  employers'  liability  and  workmen's  compensa- 
tion in  our  own  country,  Mr.  Packer  says : 

Various  forms  of  insurance  in  which  the  state  plays 
a  more  or  less  important  part  have  been  urged  for 
federal  legislation,  but  they  are  not  adapted  to  our  sys- 
tem of  law  or  the  temper  of  our  people,  nor  should  the 
state  assume  a  burden  which  is  the  result  of  action  of 
individuals  who  have  it  in  their  power  to  increase  or 

56 


reduce  that  burden  in  accordance  with  their  own  in- 
genuity, as  that  same  ingenuity  devises  new  processes 
of  manufacture,  etc. 

The  logical  principle  which  should  be  applied  in  the 
development  of  our  law  in  order  to  meet  the  changed 
conditions  incident  to  the  use  of  dangerous  appliances 
and  forces  is  expressed  in  the  language  used  by  Mr. 
Justice  Brewer  in  Atchison,  Topeka  &  Santa  Fe  Rail- 
road Co.  V.  Matthews  (174  U.  S.,  96),  in  relation  to  a 
statute  imposing  absolute  liability  upon  railroad  com- 
panies in  case  of  fire  (p.  98)  ; 

"Its  monition  to  the  railroads  is  *  =»=  *  see  to  it 
that  no  fire  escapes  from  your  locomotive,  for  if  it  does 
you  will  be  liable     *     *     *     for  the  damage  it  causes. 

The  monition  of  a  compensation  law  should  be: 
"See  to  it  that  no  accident  results  to  any  of  your  em- 
ployes by  your  use  of  these  dangerous  appliances  and 
forces,  for  if  it  does  you  shall  be  liable  to  make  com- 
pensation for  any  injury  which  follows." 

ACCIDENT    INSURANCE    IN    NEW    ZEALAND 

Comparative  Legislation  Bulletin  No.  20,  on  "Accidental 
Insurance  for  Workmen,"  by  Reuben  McKitrick,  published  by 
the  Wisconsin  Library  Commission,  Legislative  Reference  De- 
partment, July,  1909,  contains  the  following  statement  regard- 
ing "Accident  Insurance  in  New  Zealand: 

State  Insurance. — The  accident  insurance  law  of  New 
Zealand  is  of  interest  in  an  analysis  of  this  kind  be- 
.  cause  it  illustrates  a  method  by  which  state  insurance 
is  conducted.  In  New  Zealand  the  political  organiza- 
tion of  the  state  conducts  an  insurance  office  and  state 
officials  administer  the  funds  of  the  office.  The  insur- 
ance is  conducted  according  to  actuarial  principles  in 
competition  with  private  corporations.  Insurance  in 
the  state  fund  is  purely  voluntary  on  the  part  of  all  poli- 
cy holders.  The  point  of  particular  interest  in  connec- 
tion with  the  New  Zealand  insurance  department  is  the 

57 


fact  that  the  original  capital  for  the  department  is  raised 
on  the  credit  of  the  government,  that  a  sinking  fund  is 
created  out  of  the  proceeds  of  the  accident  branch  for 
the  redemption  of  the  government  securities  when  they 
mature,  and  that  a  deficiency  in  the  cash  funds  of  the 
insurance  department  shall  be  made  up  out  of  the 
public  treasury.  Any  money  advanced  to  the  insurance 
department  in  this  way  is  considered  as  a  loan  which  is 
to  be  returned  to  the  public  treasury  as  soon  as  prac- 
ticable out  of  the  proceeds  of  the  insurance  office. 

Taxation. — The  Commissioner  of  Insurance  is  liable 
to  assessment  and  taxation  in  the  same  manner  and  to 
the  same  extent  as  in  the  case  of  an  accident  insurance 
company. 

AMERICAN   STATES   AND    EUROPEAN   COUNTRIES 

The  following  statement  is  quoted  from  the  "Conclusion" 
of  this  Wisconsin  Bulletin  : 

A  comparison  of  the  laws  of  American  states  with 
those  of  European  countries,  especially  Austria  and 
Germany,  shows  that  a  great  deal  more  has  been  done 
there  than  here  toward  working  out  a  minute  classifica- 
tion of  occupations  and  industries  according  to  the 
hazard  involved  and  toward  encouraging  the  preven- 
tion of  accidents  through  the  activity  of  the  insurance 
corporations  whereby  the  cost  of  insurance  is  greatly 
reduced  and  the  burden  of  industrial  accidents  more 
equitably  distributed.  It  is  evident  that  these  countries 
are  attempting  to  do  a  great  deal  in  the  way  of  modify- 
ing their  law  relating  to  the  legal  liability  of  employers 
for  accidents  to  their  workmen  by  encouraging  the  or- 
ganization of  insurance  corporations  along  trade  lines, 
in  which  workmen  will  be  collectively  insured  against 
accidents  in  the  course  of  their  employment,  and  still  all 
the  essential  requirements  of  a  solvent  institution  be 
carefully  observed. 

68 


CHRONOLOGY   OF   FOREIGN   INDUSTRIAL   INSUR- 
ANCE AND  WORKMEN'S  COMPENSATION 
ACTS 

1875 — Finland,  December  5. 

1884 — Germany,  July  6;  supplemented  by  acts.  May  28, 
1885;   codification  of  all  acts,  June  30,  1900. 

1887— Austria,  December  28. 

1894— Norway,  July  23. 

1897_Great  Britain,  August  6;  July  30,  1900;  and  Decem- 
ber 21,  1906. 

1898 — Denmark,  January  7. 

1898 — Italy,  March  17.  This  and  subsequent  acts  codified 
January  31,  1904. 

1898— France,  April  9. 

1900 — Spain,  January  30. 

1900— New  Zealand,  October  18. 

1900— New  South  Wales,  November  5. 

1900 — Queensland,  December  5. 

1901 — Netherlands,  January  2. 

1901— Sweden,  July  5. 

1902— West  Australia,  February  19. 

1902 — Greece,  February  21. 

1902 — Luxemburg,  April  5. 

1902 — British  Columbia,  June  21. 

1903 — Belgium,  December  24. 

1905 — Cape  of  Good  Hope,  June  6. 

1907— Hungary,  April  9. 

1907— Transvaal,  August  20. 

1908— Alberta,  March  5. 

1909— Quebec,  May  29.       - 

INSURANCE    DEFINED 

The  following  definitions  of  Insurance  are  quoted  from  the 
Wisconsin  bulletin  : 

Insurance  has  been  defined  in  general  terms  in  com- 
mon law  as  a  contract  by  which  one  party  undertakes 
to  indemnify  another  against  a  loss,  damage  or  liability 
arising  from  an  unknown  or  contingent  event. 

69 


From  an  economic  point  of  view  insurance  may  be 
defined  as  a  scientific  method  whereby  the  burden  of  a 
particular  loss  or  damage  is  distributed  throughout  a 
group  of  persons  exposed  to  similar  loss  or  damage,  and 
associated  for  the  purpose  of  assuming  that  burden. 

VOLUNTARY,  COMPULSORY  AND  STATE 
INSURANCE 

That  there  may  be  no  confusion  in  the  use  of  terms,  the 
following  description  of  the  various  forms  of  liability  or  com- 
pensation insurance  is  taken  from  the  Wisconsin  bulletin  re- 
ferred to  above: 

From  the  standpoint  of  legal  responsibility  for  pro- 
tection against  accidents,  there  are  two  general  kinds 
of  insurance,  viz.,  voluntary  and  compulsory. 

Voluntary.  When  insurance  against  accident  is  pro- 
vided in  the  absence  of  legal  obligation  to  do  so,  it  is 
said  to  be  voluntary  insurance.  If  such  insurance  is 
provided  by  the  workman  himself,  it  takes  the  form  of 
personal  accident  insurance;  but  if  it  is  provided  by  the 
employer  for  himself  it  is  liability  insurance,  or  if,  for 
his  workmen,  then  it  is  collective  insurance.  Through- 
out all  of  the  United  States  and  in  Denmark,  France, 
Great  Britain,  Greece,  Russia,  Spain  and  Sweden,  in- 
surance is  voluntary. 

Compulsory.  Compulsory  insurance  is  such  insur- 
ance against  accidents  as  is  required  by  law.  It  is  col- 
lective in  form  and  is  usually  provided  from  funds  to 
which  both  employers  and  employes  contribute.  In- 
surance against  accident  is  compulsory  in  Austria, 
Belgium,  Finland,  Germany,  Italy,  Netherlands  and 
Norway. 

Distinction  Between  Compulsory  Insurance  and  State 
Insurance.  State  insurance  is  insurance  which  is  pro- 
vided in  a  fund  created  by  the  state  and  managed  by 
state  officials,  but  compulsory  insurance  is  that  insur- 
ance which  is  provided  as  the  result  of  legal  require- 
ment and  may  be  secured  in  either  a  state  fund  or  in 

60 


the  funds  of  incorporated  companies.  Compulsory  in- 
surance, therefore,  is  not  state  insurance,  but  may  be  in- 
surance required  by  law  in  incorporated  companies. 
The  accident  insurance  of  Germany  and  Austria  is  com- 
pulsory insurance,  but  not  state  insurance.  All  accident 
insurance  carried  in  the  Insurance  Department  of  New 
Zealand  is  state  insurance,  but  not  compulsory  insur- 
ance. A  quotation  from  the  explanation  of  the  German 
Workmen's  Insurance  at  the  Louisiana  Purchase  Ex- 
position in  1904  by  Dr.  Ludwig  Lass  will  illustrate  this 
principle :  "According  to  the  German  system  the  pro- 
ductive classes,  employers  and  employes,  are,  by  means 
of  corporate  self-administration,  exercising  social  self- 
help  organized  on  the  basis  of  regulations  bearing  the 
character  of  public  law.  Consequently  we  have  not  in 
Germany  as  is  often  erroneously  thought  abroad,  an  in- 
surance by  the  state,  but  an  insurance  by  the  interested 
parties  themselves,  through  the  medium  of  vital  cor- 
porations, which  are  standing  between  the  state  and  the 
individual  and  which  are  charged  with  the  execution 
of  the  insurance." 

FORMS    OF    INSURANCE    CONTRACTS 

The  Wisconsin  bulletin  also  gives  the  following  description 
of  the  forms  of  insurance  contracts : 

An  insurance  policy  is  a  contract  in  which  it  is  agreed 
that  the  occurrence  of  particular  circumstances  or 
events  shall  make  a  benefit  payable.  Policies  may  be 
classified  according  to  the  nature  of  the  agreement  made 
as  personal  accident,  employers'  liability,  or  workmen's 
collective  policies. 

Personal  Accident.  A  personal  accident  policy  is  one 
which  covers  the  individual  against  accidents  happen- 
ing to  himself. 

Employers'  Liability.  An  employer's  liability  policy 
is  one  which  insures  an  employer  against  claims  that 
may  be  made  upon  him  because  of  injuries  suffered  by 
his  employes  and  for  which  he  may  be  liable  by  reason 

61 


of  some  act  or  default.  It  relates  to  a  class  of  personal 
injuries  for  which  some  one  other  than  the  injured 
person  is  responsible,  and  who  is  legally  bound  to  make 
compensation  for  the  loss  sustained. 

Workmen's  Collective.  A  workmen's  collective  policy 
is  one  which  includes  all  the  employes  of  a  firm  or  cor- 
poration in  a  single  contract  and  insures  them  against 
loss  by  reason  of  accident  or  accident  and  sickness. 
"Workmen's  callective  insurance  is  wholesale  insurance, 
the  policy  running  to  the  employer,  and  the  protection 
thereunder  to  the  workmen  whether  the  employer  be 
legally  liable  or  not."  The  premium  for  this  class  of 
policies  is  based  on  the  number  of  employes,  the  hazard 
of  the  occupation  and  the  amount  of  wages,  and  is 
usually  paid  by  the  employer,  though  he  may  share  it 
with  his  workmen  by  deductions  from  their  wages. 

PROBLEMS  OF  LIABILITY  AND  COMPENSATION 
INSURANCE 

A  historical  study  of  the  development  of  the  problems  of 
insurance  in  all  of  its  ramifications  is  intensely  interesting  and 
instructive.  It  becomes  especially  so  when  the  problems  of 
liability  and  compensation  insurance  are  being  considered  on 
account  of  its  intense  human  interest.  Here,  as  nowhere  else, 
there  is  great  danger  of  accentuating  sympathy  at  the  expense 
of  justice  and  thus  unsettling  the  very  foundation  of  individual 
manhood,  self-reliance  on  self-support  and  a  noble  self-respect, 
which  is  the  basis  of  all  moral,  social  and  economic  welfare, 
the  sure  foundation  of  nobility  among  men. 

Ability  to  labor  is  the  foundation  of  independence  for  work- 
ingmen.  Opportunity  to  labor  is  the  open  road  to  the  realiza- 
tion of  their  independence.  Earnings  in  excess  of  necessary 
expenses  is  independence  realized. 

Loss  of  earning  power  is  a  calamity  to  a  workingman,  as 
tragic  and  crushing  as  the  loss  of  his  entire  fortune  is  to  a 
man  who  has  always  been  accustomed  to  the  emoluments  of 
wealth. 


The  true  welfare  of  workmen  is  not  best  promoted  by  those 
who  appeal  to  sympathy  or  force.  Every  man  possessing  true 
instincts  of  nobility  resents  being  patronized.  He  does  not 
want  the  conditions  under  which  he  must  live  and  work  regu- 
lated on  a  scheme  of  sympathy  which  makes  him  the  bene- 
ficiary of  a  charity.  He  wants  the  conditions  under  which  he 
works  and  lives  to  be  so  regulated  that  what  he  receives,  under 
all  circumstances  and  conditions,  shall  be  his  by  right  of  his 
earning  capacity  honestly  applied  in  honest  labor. 

Human  ingenuity  is  not  capable  of  dividing  the  products  of 
associated  labor  and  capital  in  a  way  that  will  be  certain  to 
give  to  each  precisely  his  just  share. 

An  equitable  working  basis  can  be  devised  that  will  carry 
through  the  operations  of  a  year  and  then  apportion  the  sur- 
plus increment  or  loss.  In  the  past,  the  wage  of  the  workman 
has  been  regarded  as  the  full  measure  of  his  share.  There  are 
now  indications  that  many  believe  that  this  adjustment  has 
not  given  him  his  just  share.  One  of  these  indications  is 
found  in  the  growing  belief  that  loss  of  earning  power  caused 
by  industrial  injuries  is  a  part  of  the  cost  of  production  and 
must  be  paid  by  the  purchaser  of  the  product  or  service.  The 
employer  can  only  pay  such  items  of  cost,  as  he  must  pay 
any  other  items  of  cost,  out  of  profits.  If  he  cannot  do  this 
he  will  be  impoverished  by  the  amount  of  every  such  pay- 
ment. An  employer  whose  business  fails  to  produce  a  profit 
cannot  continue  to  give  employment  to  workmen.  This  de- 
prives them  of  their  opportunity  to  labor.  It  closes  the  open 
road  to  the  realization  of  their  independence.  When  oppor- 
tunity to  labor  is  lost  through  the  failure  of  a  business  to  earn 
a  profit,  there  is  a  complete  loss  of  earning  power  for  which 
no  compensation  can  be  provided,  as  compensation  for  loss 
and  earning  power  is  absolutely  contingent  upon  the  profit  of 
the  business. 

It  is  clear  that  any  employer  can  well  afford  to  be  governed 
by  any  regulations  that  will  make  it  certain  that  his  business 
shall  be  profitable.  It  is  equally  clear  that  any  demand  made 
in  the  interest  of  labor,  whether  by  trade  unions  or  politicians 
seeking  workingmen's  votes,  that  renders  the  making  of  a 

63 


profit  impossible,  or  even  doubtful,  is  as  unwise  and  self- 
destructive  as  the  proverbial  "killing  of  the  goose  that  laid  the 
golden  egg." 

COMPULSORY    COLLECTIVE    INSURANCE 

Like  all  other  business  contingencies,  if  the  burden  of  loss 
caused  by  industrial  injuries  is  spread  over  the  operations  of  a 
sufficiently  large  number  of  employers  and  employes,  it  will 
have  no  power  to  change  a  profit  into  a  loss,  because  it  will  be 
included  in  the  cost  of  all  products  by  all  employers  and  will 
be  paid  by  the  purchaser  of  the  product  or  service,  the  same 
as  are  all  other  costs  which  must  be  paid  if  the  product  is  to 
be  supplied  or  the  service  is  to  be  rendered. 

It  is  clear  that  these  conditions  will  not  permit  any  employer 
to  be  allowed  to  enter  into  unfair  competition  with  others  by 
reason  of  his  ability  to  under  sell  them  because  he  makes  no 
contribution  to  a  fund  provided  for  the  payment  of  compensa- 
tion for  losses  caused  by  industrial  injuries  and  therefore  does 
not  include  the  amount  of  such  contribution,  required  from 
others,  as  a  part  of  the  cost  of  his  product  which  he  must  re- 
cover through  his  selling  price. 

It  is  equally  clear  that  workmen  shall  not  be  permitted  to 
enter  into  unfair  competition  with  each  other  to  secure  em- 
ployment by  means  of  waiving  their  right  to  compensation  for 
industrial  injuries. 

These  conditions,  like  governments  instituted  by  society,  to 
be  beneficial  and  effective,  must  be  all-inclusive  and  apply  with 
equal  authority  to  all  employers  and  to  all  employes  engaged 
in  the  same  or  kindred  industries.  The  development  of  the 
problems  of  liability  and  compensation  insurance  leads  directly 
to  compulsory  collective  insurance  imposed  on  all  employers 
and  on  all  employes. 

It  has  been  demonstrated  through  German  experience  that 
the  classes  needing  insurance  required  compulsion,  the  evi- 
dence showing  that  if  left  to  individual  initiative  insurance  was 
not  written.  Employers  and  public  authorities  urged  com- 
petition as  a  reason  for  failure  to  insure  their  injured  em- 

64 


ployes,   unless   the   government   dictated   uniform   conditions 
for  all. 

English  experience  demonstrates  that  the  burden  of  com- 
pensation for  industrial  injuries  persistently  tends  to  increase, 
hence  there  is  urgent  need  for  great  caution  in  formulating 
all  legislation  of  this  class. 

ECONOMIC   AND    LEGAL   DEMAND 

In  support  of  this  conclusion,  the  following  brief  review  of 
the  economic  and  legal  demand  is  quoted  from  the  Wisconsin 
bulletin  on  "Accident  Insurance  for  Vv^orkingmen,"  to  which 
reference  has  previously  been  made: 
Purpose : 

The  primary  purpose  of  accident  insurance  for  work- 
ingmen  is  to  provide  a  certain  and  adequate  return  ^or 
the  economic  loss  of  wages  due  to  personal  injury  in 
the  course  of  employment. 
Personal  Accident  Insurance: 

The  common  law  doctrine  provides  no  legal  protec- 
tion for  workmen  except  in  cases  of  negligence  on  the 
part  of  employers.  To  a  limited  extent  this  rule  is  being 
modified  in  certain  states  by  statutory  provisions  which 
increase  the  responsibility  of  the  employer  for  accidents, 
especially  in  so  far  as  they  may  be  due  to  the  negligence 
of  a  fellow  servant.  The  lack  of  legal  protection  and 
the  personal  care  for  themselves  and  those  dependent 
upon  them  prompt  many  individual  workmen  to  insure 
themselves  against  accidents.  This  gives  rise  to  a  de- 
mand for  personal  accident  insurance  which  is  supplied 
by  legal  reserve  companies,  assessment  and  fraternal 
companies  or  trade  unions  which  conduct  a  benefit  de- 
partment on  the  assessment  plan. 
Employers'  Liability  Insurance : 

All  employers  are  liable  under  the  common  law  for 
injuries  to  their  workmen  which  are  due  to  their  own 
negligence.  In  some  states  the  legal  responsibility  of 
employers  in  certain  industries  is  considerably  increased 
by  statutory  abrogation  of  the  fellow  servant  rule,  and 

65 


modification  of  the  laws  of  comparative  negligence  and 
assumption  of  risk.  In  some  foreign  countries  particu- 
larly England  and  New  Zealand  employers  are  made 
legally  liable  for  all  accidents  regardless  of  negligence. 
The  payment  of  a  damage  suit  or  the  payment  of  a  per- 
sonal injury  claim  in  lieu  of  a  suit  may  and  frequently 
does  place  the  finances  of  an  employer  in  a  critical  con- 
dition. In  order  to  avoid  such  a  contingency  many  em- 
ployers insure  themselves  against  their  legal  liability 
for  injury  to  their  employes.  This  gives  rise  to  a  de- 
mand for  v^hat  is  know^n  as  "Employers'  Liability"  in- 
surance which  is  supplied  by  legal  reserve  insurance 
companies  organized  on  either  the  stock  or  mutual  plan. 
Workmen's  Collective  Insurance: 

Some  employers  out  of  motives  purely  personal  prefer 
to  insure  their  employes  against  accident  rather  than 
to  insure  themselves  against  legal  liability  for  the  acci- 
dent should  it  occur.  In  that  event  the  employers 
usually  obtain  a  policy  which  covers  all  the  workmen 
in  the  plant  and  pay  the  premium  for  it  but  they  fre- 
quently share  the  cost  of  such  insurance  with  their 
workmen  by  deductions  from  the  pay  roll.  In  some 
foreign  countries,  notably  Germany  and  Austria,  em- 
ployers in  certain  industries  are  required  by  law  to  in- 
sure their  employes  against  accident  rather  than  to 
insure  themselves  against  legal  liability  for  the  accident. 
This  situation  gives  rise  to  a  demand  for  what  is  known 
as  "Workmen's  Collective"  insurance  which  is  furnished 
both  in  the  United  States  and  in  foreign  countries  by 
legal  reserve  companies  organized  on  the  stock  or 
mutual  plan. 

METHODS    OF    PROVIDING    INSURANCE 

Many  methods  of  providing  insurance  have  been  devised. 
Some  are  socialistic,  some  sympathetic,  some  unsafe,  and  some 
safe. 

The  use  of  public  funds  collected  from  taxpayers  by  the 
arbitrary  power  of  government  for  any  purpose  that  can  be 


served  with  equal  economic  advantage  by  private  enterprise  is 
socialistic. 

The  active  principle  in  socialistic  methods  of  insurance  is  to 
increase  the  scope  of  governmental  activities  at  the  expense 
of  private  enterprise  under  the  plea  of  furnishing  insurance  at 
cost,  thus  destroying  profit  which  is  the  source  from  which 
capital  is  created,  the  inducement  to  private  enterprise. 

Mutual  benefit  associations  are  held  together  by  the  active 
principle  of  sympathy  for  the  relief  of  a  brother  in  distress, 
through  a  desire  to  obtain  benefits  for  the  least  possible  outlay. 
The  diflference  between  safe  and  unsafe  methods  of  insur- 
ance is  caused  by  lack  of  responsibility  for  premium  rates,  for 
the  management  of  reserve  funds  and  liability  of  loss  of  capital 
invested  when  premium  receipts  are  insufficient. 

In  his  study  of  "Accident  Insurance  for  Workingmen,"  Mr. 
Reuben  McKitrick  says : 

The     business     of     insurance    is    usually    conducted 
through  one  of  two  general  plans  of  organization,  viz.,  a 
state  insurance  fund,  or  an  incorporated  company. 
The     state    insurance    fund"    which    he    describes    is    the 
socialistic  method  whereby  the  taxpayer  is  made  the  under- 
writer of  last  resort.     As  all  property  within  the  jurisdiction 
of  a  government,  however  owned,  may  be  seized  by  means 
of  taxation  for  the  payment  of  any  and  every  government  ob- 
ligation,  however   and   for   whatever   purpose   incurred,    this 
method  is  safe  in  the  sense  of  making  certain  the  payment  of 
the  compensation  covered  by  the  insurance.     This,  however, 
is  not  true  of  the  so-called  state  insurance  fund  of  Ohio  as  the 
state  does  not  underwrite  the  obligation  to  pay  the  compensa- 
tion required  by  the  terms  of  the  payment  of  the  insurance 
premium. 

Mr.  McKitrick  describes  the  ''State  Fund,"  ''Stock  Com- 
pany," "Mutual  Company,"  and  "Assessment  Company" 
methods  of  insurance  as  follows: 

Insurance  in  a  State  Fund.  Some  foreign  countries 
have  organized  a  state  insurance  department  in  which  a 
person  or  firm  may  become  insured  just  as  in  an  incor- 
porated company.    State  officials  collect  and  administer 

67 


the  funds  and  the  state  guarantees  the  payment  of 
policy  claims  in  case  of  a  deficit  in  the  cash  funds 
of  the  insurance  department.  A  good  illustration  of 
state  insurance  is  found  in  New  Zealand,  where  the 
State  Insurance  Department  is  organized  into  three 
branches,  viz.,  fire,  accident  and  life;  and  furnishes 
insurance  on  strictly  business  principles  in  competition 
with  incorporated  companies. 

Insurance  in  Incorporated  Companies.  The  more 
usual  method  of  conducting  insurance  is  through  the 
medium  of  incorporated  companies.  Under  this  system 
the  state  supervises  and  regulates  the  insurance  busi- 
ness but  does  not  conduct  it.  Insurance  corporations 
are  formed  under  general  laws.  They  collect,  adminis- 
ter and  disburse  all  the  funds  and  assume  all  liability 
for  the  payment  of  policy  claims  and  expenses  in  case 
of  a  deficit  in  the  cash  funds. 

The  state  fixes  a  standard  of  solvency  by  requiring 
companies  to  have  certain  amounts  of  capital,  to  main- 
tain reserve  funds,  to  invest  their  assets  in  legally  au- 
thorized securities,  to  render  annual  statements  and  to 
comply  with  certain  other  legal  regulations.  It  thereby 
protects  the  policy  holders  from  an  improper  conduct 
of  the  business  through  its  lawful  agents,  the  insurance 
corporations.  This  is  the  method  adopted  by  all  of 
the  United  States,  by  England  except  in  case  of  life 
insurance  through  the  post  ofiice,  and  by  Austria  and 
Germany. 

Insurance  in  Mutual  Companies.  'A  corporation  doing 
an  insurance  business,  which  has  no  capital  stock  and  in 
the  management  and  profits  of  which  the  policy  holders 
alone  participate,  is  a  mutual  company.'  The  essential 
features  of  a  mutual  company  are  that  all  policy  holders 
are  members  of  the  company,  that  the  companies  are 
required  by  law  fo  have  a  minimum  membership,  that 
the  funds  are  made  up  from  cash  premiums  and  assess- 
able premium  notes,  and  that  the  policy  holders  partici- 
pate in  the  profits.    Certain  funds  of  a  mutual  company 

68 


in  Illinois  have  been  defined  by  statute  as  the  capital 
of  the  company,  and  in  a  few  other  states  mutual  com- 
panies have  what  is  known  as  a  guarantee  capital,  but 
a  guarantee  fund  or  the  payment  of  cash  premiums  does 
not  change  the  character  of  a  mutual  company  to  that 
of  a  stock  company. 

LEVEL  PREMIUM  AND  ASSESSMENT  INSURANCE 

The  difference  between  "Level  Premium"  and  "Assessment 
Insurance"  is  described  by  Mr.  McKitrick,  as  follows: 

Level  Premium  Companies.  Level  premium  insur- 
ance may  be  defined  as  that  insurance  which  is  fur- 
nished in  return  for  a  periodical  fixed  premium  pay- 
able in  advance  and  based  on  experience  tables  without 
reference  to  the  losses  or  expenses  which  may  be 
actually  experienced  in  any  particular  year,  as  a  price 
paid  for  the  assumption  of  risk,  and  for  which  the  in- 
sured is  relieved  of  liability  for  any  assessment  to  cover 
unexpected  losses  or  expenses.  Level  premium  com- 
panies charge  a  premium  sufficient  to  maintain  such 
reverses  as  will  enable  the  company  to  carry  out  its 
own  obligations  on  the  basis  originally  agreed  upon 
and  to  protect  it  against  unexpected  losses  and  ex- 
penses. Mr.  Miles  M.  Dawson,  an  eminent  New  York 
actuary,  explains  the  necessity  for  these  reserves  in 
the  following  terms:  *A  level  premium  to  cover  an 
increasing  hazard,  converging  into  certainty  of  loss,  as 
does  a  whole  life  premium,  calls  for  an  accumulation 
of  the  excess  of  the  premium  over  the  current  cost 
during  the  earlier  years,  the  drawing  back  from  this 
accumulation  and  its  interest  during  the  latter  years 
and  the  final  application  of  the  entire  fund  toward  pay- 
ing the  insured's  own  claim  whenever  his  death  takes 
place.'  Reserves  thus  set  aside  constitute  the  distin- 
guishing characteristic  of  level  premium  insurance. 
Practically  all  stock  companies,  and  such  mutual  com- 
panies, as  provide  in  their  policies  for  the  payment  of 
fixed  premiums,  contract  insurance  on  the  level  premium 


plan  and  are  designated  as  'ievel  premium"  or  ''old  line" 
companies. 

Assessment  Companies.  Assessment  insurance  is  that 
insurance  which  is  provided  from  funds  derived  from 
assessments  or  periodical  calls  levied  to  cover  a  par- 
ticular loss  or  the  losses  and  expenses  of  a  particular 
term.  'The  predominant  and  distinguishing  feature  of 
all  mutual  benefit  associations  is  that  the  payment  of 
losses  by  death  or  injury  is  not  by  a  fixed  premium 
payable  in  advance,  as  in  the  case  of  ordinary  insurance 
companies,  nor  by  deposit  notes,  as  in  the  case  of  mu- 
tual companies,  but  by  post  mortem  assessments,  in- 
tended to  liquidate  specific  losses  and  levied  only  on 
surviving  members.'  It  is  customary,  however,  among 
most  assessment  companies  to  charge  an  anticipated 
assessment  in  the  nature  of  a  more  or  less  regular 
premium,  but  on  the  condition  that  an  additional  as- 
sessment may  be  charged  in  case  of  a  deficit.  The 
character  of  an  assessment  or  co-operative  company  is 
not  affected  by  the  fact  that  it  may  have  established 
and  maintains  an  emergency  or  guaranty  fund  to  insure 
the  prompt  payment  of  its  losses. 

INSURANCE  MUST  BE  FINANCIALLY  SOUND 

Insurance,  to  be  insurance,  must  be  financially  sound.  When 
it  is  not  financially  sound  it  is  a  delusion.  Mr.  McKitrick  well 
says: 

The  one  quality  of  supreme  importance  in  all  plans 
and  methods  of  insurance  is  solvency,  the  ability  to 
pay  the  benefits  agreed  upon. 

The   problem   in   all   efforts    to    insure    workingmen 
against  accidents  is  to  devise  a  method  which  will  so 
fit  into  the  economic  situation  as  not  to  be  too  burden- 
some to  either  the  employer  or  the  employe  and  still  be 
financially  sound. 
Based  on  experience,  requirements  as  to  the  management 
of  insurance  funds,  designed  to  make  and  keep  the  insurance 
written    financially    sound,    have   gradually    been    formulated 

70 


into  law.  These  requirements  must  be  observed  by  all  writers 
of  insurance,  by  whatever  method,  if  the  insurance  they  write 
is  to  be  safeguarded  from  being  a  delusion  when  the  inevitable 
crucial  test  comes. 

RESERVE  FUND  AND  PROFITS 

The  use  of  insurance  funds  and  the  requirements  for  hand- 
ling them  in  a  way  to  safeguard  the  insurance  written  are  de- 
scribed by  Mr.  McKitrick  as  follows : 

In  general  all  that  part  of  the  income  of  an  insurance 
company  which  is  not  used  to  meet  current  losses  and 
expenses  is  credited,  according  to  well  established 
principles  of  business,  to  one  or  more  of  the  reserve 
funds  whence  it  becomes  a  liability  of  the  company 
and  is  invested  according  to  law  for  the  security  of  poli- 
cy holders.  The  reserve  funds  to  which  it  may  be 
credited,  have  been  named  according  to  the  purpose 
which  they  serve.  The  remainder  of  the  income  after 
those  reserves  have  been  set  aside  constitutes  profits. 

Reinsurance  Reserve.  Theoretically  a  reinsurance 
reserve  is  a  fund  set  aside  from  premiums  collected 
sufficient  in  amount  to  enable  a  company  to  transfer 
or  reinsure  all  its  outstanding,  unexpired  risks  in  some 
other  solvent  company  or  to  settle  the  claims  that  be- 
come payable  thereon  as  they  arise.  Such  a  reserve 
can  be  computed  according  to  scientific  principles  and 
is  required  by  law  to  be  maintained  by  all  legal  reserve 
or  level  premium  companies.  It  has  been  judicially  de- 
scribed as  a  fund  which  must  be  equal  in  amount  at  all 
times  to  the  aggregate  policy  liabilities  at  their  then 
present  value.  It  is  created  to  secure  these  liabilities, 
and  is  from  that  circumstance  impressed  in  a  certain 
sense  with  an  equity  in  favor  of  the  holders  of  policies. 
This  fund  is  also  known  as  the  "premium  reserve." 

Liability  Reserve.  The  liability  reserve  is  a  special 
fund  which  employers'  liability  companies  are  required 
by  law  in  some  states  to  set  aside  as  security  for  obli- 
gations accrued  but  unpaid.     These  claims  accumulate 

71 


because  of  the  time  required  for  adjustment  and  set- 
tlement, or  for  litigation,  and  they  are  no  longer  pro- 
tected by  premium  reserve  because  the  insurance  is 
not  in  force,  since  the  policy  becomes  a  claim  against 
the  company  as  soon  as  the  injury  occurs. 

Contingency  Reserve  or  Surplus.  A  contingency  re- 
serve or  surplus  is  a  fund  which  is  set  aside  after  the 
reinsurance  reserve  has  been  provided  for  to  meet  un- 
expected losses  and  expenses.  The  reinsurance  reserve 
is  computed  on  the  basis  of  experience  for  a  period  of 
years.  It  is,  therefore,  based  on  averages,  and  in 
normal  conditions  a  company  would  be  financially 
sound  with  no  other  reserve  than  its  reinsurance  re- 
serve. But  in  order  to  guard  against  exceptional  losses, 
some  companies  set  aside  a  special  fund  before  distrib- 
uting profits,  which  is  known  as  the  contingency  reserve 
or  surplus.  This  reserve  is  not  required -by  law,  but  it 
is  maintained  by  every  conservative  company  as  a  safe- 
guard against  emergency. 

Reserve  or  Emergency  Funds.  Reserve  or  emergency 
funds  is  the  term  applied  to  funds  set  aside  by  mutual 
benefit  societies  in  order  to  enable  prompt  payment  of 
policy  claims  in  lieu  of  an  assessment.  They  are  re- 
quired by  law  in  some  states  to  be  maintained  by  this 
class  of  companies ;  in  other  states  their  maintenance 
is  permissible  but  not  obligatory. 

Profits.  "Profits"  is  a  term  applied  in  the  statutes  of 
a  number  of  states  to  that  portion  of  the  funds  of  an 
insurance  company  not  required  for  the  payment  of 
losses  and  expenses,  nor  set  apart  for  any  other  pur- 
poses required  or  allowed  by  law.  The  term  ''profits" 
represents  a  definite  concept  in  insurance  law,  for  a 
large  number  of  states  specify  that  dividends  may  be 
declared  only  from  profits,  and  that  these  profits  must 
be  estimated  according  to  statutory  rule. 


72 


REQUIREMENTS    OF    CONSERVATIVE    PROGRESS: 
CHANGE  OF  BASE  FROM  EMPLOYERS'  LIA- 
BILITY TO  WORKMEN'S  COMPENSATION 

Experience  clearly  shows  that  using  employers'  liability  as 
the  insurable  basis  for  industrial  injuries,  instead  of  compensa- 
tion for  the  injured  workman,  is  the  fundamental  cause  of  dis- 
satisfaction with  old  methods.  Under  the  liability  method  the 
employer  is  insured  against  the  payment  of  damage  claims 
for  industrial  injuries  required  by  law.  This  makes  it  neces- 
sary for  the  injured  workman  to  demand  payment  from  his 
employer  and,  in  case  his  claim  is  not  settled  by  the  insurance 
company,  to  sue  his  employer  for  its  amount.  There  being  no 
statutory  schedule  fixing  the  amount  of  damages  for  specified 
injuries,  the  amount  of  the  workman's  claim  under  this  method 
is  usually  fixed  by  a  class  of  lawyers  known  as  "ambulance 
chasers"  who  take  good  care  to  make  it  large  enough  to  cover 
an  exorbitant  fee  for  themselves. 

The  legal  action  is  against  the  employer,  but  the  judgment 
is  paid  by  the  insurance  company.  Thus  the  employer  and 
the  insurance  company  are  both  arrayed  against  a  compar- 
atively defenseless  employe  to  reduce  the  amount  of  the  com- 
pensation to  be  paid  to  him  on  account  of  an  industrial  injury, 
or  to  avoid  payment  altogether. 

A  necessary  result  of  this  method  is  the  generation  of  bitter 
feelings  in  workmen  against  employers;  a  strong  popular 
prejudice  against  employers,  induced  by  sympathy  with  ill- 
treated  employes,  which  renders  it  almost  impossible  for  an 
employer  to  secure  a  just  verdict  from  a  jury  on  a  claim  for 
compensation  for  an  industrial  injury,  and  a  popular  demand 
for  drastic  regulation,  if  not  the  actual  wiping  out,  of  the 
business  of  industrial  insurance  by  privately  owned  and  man- 
aged insurance  companies. 

All  of  these  evils  can  be  eliminated  from  the  problem  by 
changing  the  insurable  base  from  "employer's  liability"  to 
"workmen's  compensation." 

WORKMEN'S  COMPENSATION 

Under  this  new  method  the  employer,  on  the  payment  of 
the  required  premium,  is  relieved  from  all  liability.    The  work- 

73 


man  being  the  one  insured,  his  claim  is  against  the  insurance 
company,  not  against  his  employer.  The  employer,  having 
paid  the  premium,  is  joined  in  interest  with  his  employes  to 
secure  the  prompt  payment  of  the  just  claim  of  his  injured 
employes,  thus  giving  tangible  evidence  of  his  interest  in  their 
welfare.  Under  such  circumstances,  excepting  in  rare  in- 
stances, the  full  compensation  rightfully  claimed  will  be 
promptly  paid,  and  without  any  expense  for  collection  on  the 
part  of  the  employe.  This  method  should  generate  a  feeling 
of  mutual  respect  and  good-will  between  employers  and  em- 
ployes and  substitute  popular  appreciation  for  the  popular 
prejudice  that  has  resulted  from  the  old  method  of  arraying 
the  employer  against  an  injured  employe  in  his  effort  to  se- 
cure compensation  for  his  injury. 

STATUTORY    COMPENSATION    FOR    INJURIES. 

Another  cause  of  grievous  dissatisfaction  with  the  old 
method  is  in  the  uncertainty  as  to  the  amount  of  compensation 
an  employe  can  collect,  the  amount  being  left  to  the  ad- 
juster of  the  insurance  company  or  the  verdict  of  a  jury. 
As  a  result,  compensations  for  an  identical  injury  varied  from 
very  little  to  an  amount  so  large  it  was  virtually  blackmail. 

Scientific  study  of  the  statistics  of  experience  demonstrates 
the  practicability  of  fixing  statutory  compensation  for  specific 
injuries  by  the  enactment  of  a  law  containing  a  compensa- 
tion schedule.  In  this  way  the  question  of  the  amount  of 
compensation  is  definitely  fixed  by  law.  This  leaves  the  fact 
of  the  injury,  and  the  conditions  under  which  it  was  sus- 
tained, the  only  questions  at  issue  between  an  injured  em- 
ploye and  the  insurance  company.  In  the  settlement  of  these 
questions  the  physical  evidence  of  the  injury,  the  testimony 
of  fellow  workmen  and  of  the  employer  will  be  conclusive. 
The  taking  of  this  testimony  need  not  involve  serious  loss  of 
time,  nor  the  incurring  of  expense  on  the  part  of  the  injured 
employe.  This  will  enable  him  promptly  to  receive  the  full 
benefit  of  the  compensation  to  which  he  is  entitled  by  law. 

74 


STATUTORY  COMPENSATION  IN  GERMANY 

Scope  of  the  Law.  Since  1884  the  German  govern- 
ment has  required  that  all  workmen  and  administra- 
tive officers  employed  in  mines,  salt  works,  establish- 
ments in  which  ores  are  treated,  quarries,  pits,  on 
wharves,  and  in  building  establishments,  factories  and 
smelting  works  must  be  insured  against  accidents  oc- 
curring in  the  course  of  their  occupations.  In  general- 
the  compensation  consists  of  medical  treatment  and 
66  2-3  per  cent,  of  wages  for  disability  after  the  thir- 
teenth week.  Prior  to  that  time  compensation  for  acci- 
dent comes  out  of  sickness  insurance  funds.  Compensa- 
tion up  to  the  maximum  limit  of  60  per  cent,  of 'the  annu- 
al wage  may  be  paid  the  widow,  children  and  other  de- 
pendents in  case  of  fatal  accident's  in  addition  to  funeral 
benefits  and  whatever  may  have  been  paid  previous  to 
death.  In  its  nature  this  is  workmen's  collective  in- 
surance in  that  it  is  furnished  by  employers  and  covers 
all  the  workmen  in  the  factory  or  establishment. 

PROPOSED   SCHEDULE  OF   STATUTORY   COMPEN- 
SATION IN  OHIO 

The  schedule  of  compensation  for  specified  injuries  pro- 
posed in  a  bill  now  pending  in  the  Ohio  Legislature  (Febru- 
ary, 1913),  S.  B.  No.  48,  Mr.  Green,  is  as  follows: 

Section  31.  No  compensation  shall  be  allowed  for 
the  first  week  after  the  injury  is  received,  except  the 
disbursement  hereinafter  authorized  for  medical,  nurse 
and  hospital  services  and  medicines,  and  for  funeral 
expenses. 

Section  32.  In  case  of  temporary  disability,  the  em- 
ploye shall  receive  sixty-six  and  two-thirds  per  cent, 
of  his  average  weekly  wages  so  long  as  such  disability  is 
total,  not  to  exceed  a  maximum  of  twelve  dollars  per 
week,  and  not  less  than  a  minimum  of  five  dollars  per 
week,  unless  the  employe's  wages  shall  be  less  than 
five  dollars  per  week,  in  which  event  he  shall  receive 
compensation  equal  to  his  full  wages;  but  in  no  case 

7^ 


to  continue  for  more  than  six  years  from  the  date  of  the 
injury,  or  to  exceed  three  thousand,  four  hundred  dol- 
lars. 

Section  33.  In  case  of  injury  resulting  in  partial 
disability,  the  employe  shall  receive  sixty-six  and  two- 
thirds  per  cent,  of  the  impairment  of  his  earning  capa- 
city during  the  continuance  thereof,  not  to  exceed  a 
maximum  of  twelve  dollars  per  week,  or  a  greater 
sum  in  the  aggregate  than  thirty-four  hundred  dollars. 
In  cases  included  in  the  following  schedule,  the  dis- 
ability in  each  case  shall  be  deemed  to  continue  for 
the  period  specified  and  the  compensation  so  paid  for 
such  injury  shall  be  as  specified  herein,  to-wit: 

For  the  loss  of  a  thumb,  66  2-3  per  cent,  of  the  average 
wages  during  sixty  weeks. 

For  the  loss  of  a  first  finger,  commonly  called  index 
finger,  66  2-3  per  cent,  of  the  average  weekly  wages 
during  thirty-five  weeks. 

For  the  loss  of  a  second  finger,  66  2-3  per  cent,  of 
the  average  weekly  wages  during  thirty  weeks. 

For  the  loss  of  a  third  finger,  66  2-3  per  cent,  of  the 
average  weekly  wages  during  twenty  weeks. 

For  the  loss  of  a  fourth  finger,  commonly  known  as 
the  little  finger,  66  2-3  per  cent,  of  the  average  weekly 
wages  during  fifteen  weeks. 

The  loss  of  the  second,  or  distal  phalange  of  the 
thumb,  shall  be  considered  equal  to  the  loss  of  one-half 
of  such  thumb ;  the  loss  of  more  than  one-half  of  such 
thumb  shall  be  considered  to  be  equal  to  the  loss  of 
the  whole  thumb. 

The  loss  of  the  third,  or  distal  phalange,  of  any  finger 
shall  be  considered  to  be  equal  to  the  loss  of  one-third 
of  such  finger. 

The  loss  of  the  middle  or  second  phalange,  of  any 
finger  shall  be  considered  to  be  equal  to  the  loss  of  two- 
thirds  of  such  finger. 

The  loss  of  more  than  the  middle  and  distal  phalanges 
of  any  finger  shall  be  considered  to  be  equal  to  the  loss 

76 


of  the  whole  finger;  provided,  however,  that  in  no  case 
will  the  amount  received  for  more  than  one  finger  ex- 
ceed the  amount  provided  in  this  schedule  for  the  loss 
of  a  hand. 

For  the  loss  of  the  metacarpal  bone  (bones  of  the 
palm)  for  the  corresponding  thumb,  finger,  or  fingers 
as  above,  add  ten  weeks  to  the  number  of  weeks  as 
above. 

For  ankylosis  (total  stiffness  of)  or  contractures 
(due  to  scars  or  injuries)  which  makes  the  fingers  more 
than  useless,  the  same  number  of  weeks  apply  to  such 
finger  or  fingers  (not  thumb)  as  given  above. 

For  the  loss  of  a  hand,  66  2-3  per  cent,  of  the  average 
weekly  wages  during  one  hundred  and  fifty  weeks. 
For  the  loss  of  an  arm,  66  2-3  per  cent,  of  the  average 
weekly  wages  during  two  hundred  weeks. 

The  above  schedule  of  injuries  shall  be  considered 
to  apply  to  the  right  hand  and  arm.  Compensation 
shall  be  reduced  20  per  cent,  in  cases  of  similar  injury 
to  the  left  hand  or  arm. 

i  or  the  loss  of  :i  g'eat  toe,  66  2-3  per  cent,  of  the 
average  weekly  wages   during  thirty  weeks. 

For  the  loss  of  one  of  the  toes  other  than  the  great 
toe,  66  2-3  per  cent  of  the  average  weekly  wages  during 
ten  weeks. 

The  loss  of  more  than  two-thirds  of  any  toe  shall  be 
considered  to  be  equal  to  the  loss  of  the  whole  toe. 

The  loss  of  less  than  two-thirds  of  any  toe  shall  be 
considered  to  be  no  loss. 

For  the  loss  of  a  foot,  66  2-3  per  cent,  of  the  average 
weekly  wages  during  one  hundred  and  twenty-five 
weeks. 

For  the  loss  of  a  leg,  66  2-3  per  cent,  of  the  average 
weekly  wages  during  one  hundred  and  seventy-five 
weeks. 

For  the  loss  on  an  eye,  66  2-3  per  cent,  of  the  average 
weekly  wages  during  one  hundred  weeks. 

77 


The  amounts  specified  in  this  clause  are  all  subject 
to  the  limitation  as  to  the  maximum  weekly  amount 
payable  as  hereinbefore  specified  in  this  section. 

Section  34.  In  cases  of  permanent  total  disability, 
the  award  shall  be  sixty-six  and  two-thirds  per  cent, 
of  the  average  weekly  wages,  and  shall  continue  until 
the  death  of  such  person  so  totally  disabled,  but  not  to 
exceed  a  maximum  of  twelve  dollars  per  week,  and  not 
less  than  a  minimum  of  five  dollars  per  week,  unless 
the  employe's  average  weekly  wages  are  less  than  five 
dollars  per  week  at  the  time  of  the  injury,  in  which 
event  he  shall  receive  compensation  in  an  amount  equal 
to  his  average  weekly  wages. 

The  loss  of  both  hands  or  both  arms,  or  both  feet  or 
both  legs,  or  both  eyes,  or  of  any  two  thereof,  shall 
prima  facie  constitute  total  and  permanent  disability, 
to  be  compensated  according  to  the  provisions  of  this 
section. 

Section  35.  In  the  case  the  injury  causes  death  with- 
in the  period  of  two  years,  the  benefits  shall  be  in  the 
amounts  and  to  the  persons  following: 

1.  If  there  be  no  dependents,  the  disbursements 
from  the  state  insurance  fund  shall  be  limited  to  the 
expenses  provided  for  in  section  forty-two  hereof. 

2.  If  there  are  wholly  dependent  persons  at  the  time 
of  the  death,  the  payment  shall  be  sixty-six  and  two- 
thirds  per  cent,  of  the  average  weekly  wages,  and  to 
continue  for  the  remainder  of  the  period  between  the 
date  of  the  death,  and  six  years  after  the  date  of  the 
injury,  and  not  to  amount  to  more  than  a  maximum 
of  thirty-four  hundred  dollars,  nor  less  than  a  mini- 
mum of  one  thousand,  five  hundred  dollars. 

3.  If  there  are  partly  dependent  persons  at  the  time 
of  the  death,  the  payment  shall  be  sixty-six  and  two- 
thirds  per  cent,  of  the  average  weekly  wages,  and  to 
continue  for  all  of  such  portion  of  the  period  of  six  years 
after  the  date  of  the  injury,  as  the  board  in  each  case 

78 


fnay  determine,  and  riot  to  amount  to  more  than  a  max:- 
imum  of  thirty-four  hundred   dollars. 

4.  The  following  persons  shall  be  conclusively  pre- 
sumed to  be  wholly  dependent  for  support  upon  a  de- 
ceased employe : 

(a)  A  wife  upon  a  husband  with  whom  she  lives  at 
the  time  of  his  death. 

(b)  A  child  or  children  under  the  age  of  sixteen 
years  (or  over  said  age  if  physically  or  mentally  in- 
capacitated from  earning)  dependent  upon  the  parent 
with  whom  he  is  living  at  the  time  of  the  death  of  such 
parent. 

In  all  other  cases,  questions  of  dependency,  in  whole 
or  in  part,  shall  be  determined  in  accordance  with  the 
facts  in  each  particular  case  existing  at  the  time  of  the 
injury  resulting  in  the  death  of  such  employe,  but  no 
person  shall  be  considered  as  dependent  unless  a  mem- 
ber of  the  family  of  the  deceased  employe,  or  bears  to 
him  the  relation  of  husband  or  widow,  lineal  descendant, 
ancestor  or  brother  or  sister.  The  word  "child"  as 
used  in  this  act,  shall  include  a  posthumous  child,  and 
a  child  legally  adopted  prior  to  the  injury. 

Section  36.  The  benefits  in  case  of  death  shall  be 
paid  to  such  one  or  more  of  the  dependents  of  the  de- 
cedent, for  the  benefit  of  all  the  dependents  as  may 
be  determined  by  the  board,  which  may  apportion  the 
benefits  among  the  dependents  in  such  manner  as  it  may 
deem  just  and  equitable.  Payment  to  a  dependent  sub- 
sequent in  right  may  be  made,  if  the  board  deem  proper, 
and  shall  operate  to  discharge  all  other  claims  there- 
for. The  dependent  or  person  to  whom  benefits  are 
paid  shall  apply  the  same  to  the  use  of  the  several 
beneficiaries  thereof  according  to  their  respective 
claims  iipon  the  decedent  for  support,  in  compliance 
with  the  finding  and  direction  of  the  board. 

In  all  cases  of  death  where  the  dependents  are  a 
widow  and  one  or  more  minor  children,  it  shall  be  suffi- 
cient for  the  widow  to  make  application  to  the  board 

79 


on  behalf  of  herself  and  minor  children ;  and  in 
cases  where  all  of  the  dependents  are  minors,  the  ap- 
plication shall  be  made  by  the  guardian  or  next  friend 
of  such  minor  dependents. 

Section  Z7.  The  average  weekly  wage  of  the  injured 
person  at  the  time  of  the  injury  shall  be  taken  as  the 
basis  upon  which  to  compute  the  benefits. 

Section  38.  If  it  is  established  that  the  injured  em- 
ploye was  of  such  age  and  experience  when  injured  as 
that  under  natural  conditions  his  wages  would  be  ex- 
pected to  increase,  the  fact  may  be  considered  in  ar- 
riving at  his  average  weekly  wage. 

Section  42.    In  addition  to  the  compensation  provided 
for  herein,  the  board  shall  disburse  and  pay  from  the 
insurance  fund,  such  amounts  for  medical,  nurse    and 
hospital  services  and  medicine  as  it  may  deem  proper; 
not,  however,  in  any  instance,  to  exceed  the   sum  of 
two  hundred  dollars,  and  in  case  death  ensues  from  the 
injury,   reasonable   funeral   expenses   shall   be   likewise 
disbursed  and  paid  from  the  fund  in  an  amount  not  to 
exceed  the  sum  of  one  hundred  and  fifty  dollars,  and 
the  board  shall  have  full  power  to  adopt  rules  and  regu- 
lations with  respect  to  furnishing  medical,  nurse  and 
hospital    services    and    medicine    to  injured   employes 
entitled  thereto,  and  for  the  payment  therefor. 
This  publication  of  this  schedule  is  not  an  endorsement  of 
its  provisions.     It  is  quoted  here  only  for  the  purpose  of  il- 
lustrating the  system  proposed.     Similar  schedules  are  found 
in  the  laws  of  one  or  two  other  states. 

COLLECTIVE  INSURANCE  RELEASES  EMPLOYERS 
FROM  ALL  LIABILITY 

Employers'  liability  insurance  safeguards  employers  against 
claims  for  comepnsation  for  industrial  injuries  made  by 
any  employe.  In  shifting  the-  insurable  base  from  employ- 
ers' liability  to  workmen's  compensation,  it  is  necessary  to 
provide  collective  insurance  in  order  that  employers  may  be 
relieved  from  all  liability  and  workmen,  employed  by  an  em- 


ployer  who  has  secured  legal  release  from  liability  for  com- 
pensation claimed  for  industrial  injuries  sustained  by  his 
employes,  by  paying  the  required  premium  for  collective  in- 
surance, may  have  a  legal  right  to  claim  compensation  from 
the  insurance  company  to  which  the  employer  has  paid  the 
insurance  premium.  In  writing  a  collective  policy  or  contract 
the  collective  payroll  is  made  the  basis  of  the  premium  charged. 
Acceptance  of  the  theory  that  losses  caused  by  industrial  in- 
juries are  a  part  of  the  cost  of  the  product  or  service  rendered 
and  should  be  included  in  all  statements  of  costs  made  for  the 
purpose  of  determining  prices,  service  charges,  and  profits, 
makes  it  necessary  to  enforce  compulsory  collective  insurance 
upon  every  employer  engaged  in  an  insurable  industry.  If 
this  is  not  done,  the  employer  who  is  willing  to,  and  does  deal 
justly  with  his  employes  in  this  respect  will  be  placed  at  a 
competitive  disadvantage  with  the  employer  who  does  not  so 
safeguard  his  employes'  welfare.  The  principles  of  justice 
which  this  new  method  seeks  to  enforce  cannot  be  fully  ap- 
plied unless  enforced  upon  every  employer  operating  under 
similar  conditions.  In  no  other  way  can  the  losses  caused  by 
industrial  injuries  be  included  in  the  cost  of  products  and 
services. 

STATUTORY     COMPENSATION    COMPULSORY     ON 
ALL  EMPLOYES 
On  the  other  hand,  the  law  should  be  equally  compulsory 
as  against  employes. 

In  an  explanation  of  the  Ohio  law,  Mr.  H.  T.  Weston,  Rat- 
ing Actuary  of  the  Ohio  State  Liability  Board  of  Awards, 
(Journal  of  Workmen's  Compensation  Insurance,  September 
1,  1912)  says: 

If  the  employer  pays  the  premium  quoted  by  the 
board,  then  all  his  employes  must  accept  the  indemni- 
ties provided  by  the  board,  and  the  only  way  that  the 
employe  can  decline  to  accept  such  indemnities  is  to 
leave  the  service  of  such  employer,  consequently,  the 
employer  receives  full  protection  so  far  as  liability  is 
concerned. 
And,  consequently,  if  all  employers  do  not  furnish  the  guar- 
antee required  for  the  collective  insurance  of  all  their  employes, 

$1 


those  who  do  will  be  placed  at  a  disadvantage  in  competing 
with  those  who  do  not. 

The  proposition  is  to  tax  the  users  of  products  or  services 
with  the  cost  of  losses  caused  by  industrial  injuries.  The 
employer,  the  seller  of  the  product  or  service,  is  the  tax  col- 
lector. The  nature  of  a  tax  requires  that  it  shall  be  compulsory 
on  all  who  are  liable  to  pay.  It  can  be  uniformly  assessed 
and  collected  in  no  other  way. 

METHOD    OF    COERCING    EMPLOYERS    AND    EM- 
PLOYES INTO  ACCEPTING  THE  PROVISIONS 
OF  A  WORKMEN'S  COMPENSATION  LAW 
The  purpose  of  the  new  method  being  to  make  definite  the 
amount  of  compensation  that  may  be  claimed  by  an  employe 
for  a  specific  injury;  to  make  certain  the  procedure  to  be  fol- 
lowed for  its  collection ;  to  relieve  courts  from  the  necessity  of 
trying  damage  suits ;  and  to  safeguard  employers  from  liability 
to  suits  for  losses  caused  by  industrial  injuries,  it  is  necessary 
to  make  the  law  air-tight  against  claims   made  by  injured 
employes  in  any  other  way  than  through  the  insurance  com- 
pany.   The  accomplishment  of  this  purpose  is  sought  through 
depriving  the  employer  and  employe  of  the  legal    right    to 
defend  or  enforce  a  claim  in  any  other  way. 

The  Michigan  Accident  Board  explains  the  provisions  of  the 
Michigan  Workmen's  Compensation  law  in  an  official  bulletin 
(1912)  as  follows: 

Sec.  1.  In  an  action  to  recover  damages  for  personal 
injury  sustained  by  an  employe  in  the  course  of  his 
employment,  or  for  death  resulting  from  personal  in- 
juries as  sustained,  it  shall  not  be  a  defense : 

That  the  employe  was  negligent,  unless  and  except 
it  shall  appear  that  such  negligence  was  wilful; 

That  the  injury  was  caused  by  the  negligence  of  a 
fellow  employe ; 

That  the  employe  had  assumed  the  risks  inherent  in, 
or  incidental  to,  or  arising  out  of  his  employment,  or 
arising  from  the  failure  of  the  employer  to  provide  and 
maintain  safe  premises  and  suitable  appliances. 

The  provisions  of  this  section  do  not  apply  to  those 
employers  who  elect,  with  the  approval  of  the  Indus- 

82 


trial  Accident  Board,  to  pay  compensation  in  the  man- 
ner and  to  the  extent  provided  by  law;  nor  will  such 
employer  be  subject  to  any  other  liability  whatsoever, 
save  as  provided  by  this  law  for  the  death  of,  or  per- 
sonal injury  to  any  employe. 
The  broad  scope  of  the  Ohio  workmen's  compensation  law 
was  upheld  and  defined  in  an  opinion  handed  down  by  Judge 
Pugh  of  the  Superior  Court,  January  24,  1913,  in  the  suit  of 
John  E.  Schaefer  vs.  The  Cincinnati  Bickford  Tool  Company : 
No  Qualification.     There    is    no    qualification    what- 
ever; nothing  to  indicate  that  the  "neglect  or  default" 
which    fixed  liability  must  be  gross  neglect  or  slight 
neglect  or  such  neglect  as  is  entailed  by  failure  to  ex- 
ercise ordinary  care  and  prudence.     The  naked  words 
"neglect  or  default"  employed  import  prima  facie  all 
neglects  and  all  defaults.     To  limit  these  terms  to  such 
neglect  or  default  as  is   the   equivalent  of  failure   to 
exercise  ordinary  care  and  prudence  requires  a  resort 
to  construction;  it  necessitates  reading  into   the   lan- 
guage of  this  statute  some  qualification  not  expressed 
therein. 

Is  there  any  sufficient  reason  why  such  an  employer 
should  not  be  held  to  the  plain,  unqualified  language  of 
the  law?  He  has  been  invited  to  avail  himself  of  the 
protection  against  liability  of  this  kind  afforded  him  by 
the  preceding  sections  of  the  workmen's  compensation 
act,  and  has  refused  to  accept  it.  If  anything,  this  fur- 
nishes a  reason  why  his  liability  should  be  extended, 
not  limited,  by  construction. 

The  imposition  on  employers  who  refuse  to  accept 
the  protection  afforded  by  the  preceding  sections  of 
the  workmen's  compensation  act,  of  a  liability  greater 
than  has  ever  before  existed  in  this  state,  seems  to 
have  been  deliberately  intended  by  the  language  of  the 
General  Code,  Section  1465-60.  It  was  known  when  the 
act  was  being  considered  that  it  would  incur  much  op- 
position, and  that  vigorous  efforts  would  be  made  to 
prevent  employers  of  labor  from  accepting  its  provis- 
ions.   The  possibility  that  the  law,  when  enacted,  would 

83 


become  a  dead-letter  was  very  great,  and  it  was  de- 
sirable to  adopt  every  legitimate  means  of  preventing 
this.  While  the  statute  was  intended  for  the  benefit  of 
the  employer  and  employe  alike,  it  was  known  that 
many  persons  interested  in  business  thought  it  would 
work  a  hardship  on  the  former. 

A  Coercive  Clause.  To  make  the  statute  effective 
it  was  deemed  necessary  to  insert  a  coercive  clause.  In 
view  of  the  decision  in  Ives  vs.  Railway  Company,  201 
N.  Y.  276,  it  was  obviously  not  expedient  to  risk  the 
validity  of  the  law  by  absolutely  compelling  employers 
to  adopt  its  provisions,  but  it  was  apparent  that  every 
means  short  of  this  would  be  necessary.  The  history  of 
the  bill  and  its  progress  through  the  two  branches  of 
the  General  Assembly,  and  the  arguments  reported  in 
the  case  of  State  ex  rel.  vs.  Creamer,  85  O.  S.  349, 
wherein  the  constitutionality  of  the  act  was  upheld, 
indicate  clearly  the  necessity  of  some  degree  of  coercion. 
Possibly  General  Code,  Section  1465 — 60,  as  herein  con- 
strued, goes  to  the  limits  of  constitutionality. 

To  the  court  it  seems  clear  that  every  means  of  mak- 
ing the  statute  effective  should  be  employed,  if  it  can 
be  done  without  violence  to  the  language  used — and  the 
more  effective  it  can  be  made,  with  regard  to  the  ends 
contemplated  by  the  Legislature,  the  better.  It  fol- 
lows that  the  greater  the  liability  imposed  on  employers 
by  General  Code,  Section  1465-60,  the  more  likely  are 
they  to  accept  these  provisions  of  the  act  which  relieve 
them  from  such  liability.  The  opinion  of  the  Court, 
therefore,  is  that  to  relieve  an  employer  from  liability 
under  General  Code,  Section  1465-60,  a  higher  degree  of 
care  and  prudence  than  ordinary  must  be  exercised  by 
them.  The  degree  of  care  required  is  such  that  it  ex- 
cludes the  existence  of  any  "wrongful  act,"  neglect  or 
default  whatever." 

DRASTIC    COERCION    IN    LIABILITY    FOR    DEATH 

CLAIMS 
The  new  amendments  to  the  Ohio  Constitution  create  an 

exceedingly   interesting   condition   regarding  the   amount   an 

84 


employer  may  be  compelled  to  pay  on  account  of  the  death 
of  an  employe. 

Article  I,  Section  19a  provides  that,  *'The  amount  of  dam- 
ages recoverable  by  civil  action  in  the  courts  for  death  caused 
by  the  wrongful  act,  neglect,  or  default  of  another,  shall  not 
be  limited  by  law." 

This  establishes  an  unlimited  liability  for  the  amount  of 
a  death  claim.  It  may  be  as  high  as  a  greedy  "ambulance 
chaser"  may  claim  and  a  sympathetic  three  quarters  of  a  jury 
may  be  induced  to  award.  Naturally,  the  wealthier  the  em- 
ployer, the  higher  the  award  will  be,  because  he  can  stand  it. 
This  is  a  prejudiced  conception  of  justice  to  which  this  con- 
stitutional amendment  is  designed  to  give  the  authority  of 
law.  , 

Relief  from  this  unlimited  liability  is  promised  all  employers 
who  participate  in  the  workmen's  compensation  insurance 
written  by  the  Ohio  State  Liabiliity  Board  of  Awards.  In  the 
existing  law,  and  in  Sections  32  and  35-2  and  3,  of  the  pro- 
posed law,  the  statutory  compensation  for  a  death  loss  is 
$3,400. 

The  constitutionality  of  this  law  and  the  proposed  amend- 
ments thereto  rests  upon  the  Constitution,  Article  II,  Section 
35,  which  provides  that : 

"For  the  purpose  of  providing  compensation  to  work- 
men and  their  dependents,  for  death,  injuries  or  occu- 
pational diseases,  occasioned  in  the  course  of  such 
workmen's  employment,  laws  may  be  passed  establish- 
ing a  state  fund  to  be  created  by  compulsory  contribu- 
tions thereto  by  employers  and  administered  by  the 
state,  determining  the  terms  and  conditions  upon  which 
payments  shall  be  made  therefrom,  and  taking  away 
any  and  all  rights  of  action  or  defenses  from  employers 
and  employes;  but  no  right  of  action  shall  be  taken 
away  from  any  employe  when  the  injury,  disease  or 
death  arises  from  failure  of  the  employer  to  comply 
with  any  lawful  requirement  for  the  protection  of  the 
lives,  health  and  safety  of  employes.  Laws  may  be 
passed  establishing  a  board  which  may  be  empowered 
to  classify  all  occupations,  according  to  their  degree  of 

8i 


hazard,  to  fix  rates  of  contribution  to  such  fund  accord- 
ing to  such  classification,  and  to  collect,  administer  and 
distribute   such   fund,   and  to  determine   all   rights   of 
claimants   thereto." 
Of  course  an  employe's  claim  for  compensation  for  an  in- 
dustrial injury  is  a  lien  upon  the  property  of  his  employer, 
therefore   the   following  constitutional   provision.   Article   II, 
Section  33,  has  a  significant  bearing  on  statutory  compensa- 
tions : 

"Laws   may  be   passed   to   secure   to   mechanics,   ar- 
tisans, laborers,  sub-contractors  and  material  men  their 
just  dues  by  direct  lien  upon  the  property,  upon  which 
they  have  bestowed  labor  or  for  which  they  have  fur- 
»  nished  material.     No  other  provision  of  the  Constitu- 

tion shall  impair  or  limit  this  power." 
Average  wages  is  the  basis  of  computation  for  compensa- 
tion for  industrial  injuries,  therefore  the  rate  of  wages  is  an 
important  factor  in  a  workmen's  compensation  law.  Not  only 
this,  such  a  law  is  demanded  as  a  measure  to  promote  the 
welfare  of  employes.  For  these  reasons  the  following  consti- 
tutional provision,  Article  II,  Section  34,  should  be  carefully 
considered  in  connection  with  the  existing  compensation  law 
and  the  proposed  amendments  thereto: 

"Laws  may  be  passed  fixing  and  regulating  the  hours 
of  labor,  establishing  a  minimum  wage,  and  providing 
for  the  comfort,  health,  safety  and  general  welfare  of 
all  employes ;  and  no  other  provision  of  the  Constitu- 
tion shall  impair  or  limit  this  power." 
Question :     Do    the    three    constitutional    provisions    just 
quoted   give   authority  for  limiting   the   compensation   for   a 
death  claim  to  $3,400  for  employers  who  participate  in  the 
state  compensation  fund  when  Article  I,  Section  19a,  of  the 
Constitution  specifically  provides: 

"The  amount  of  damages  recoverable  by  civil  action 

in  the  courts  for  death  caused  by  the  wrongful  act, 

neglect  or  default  of  another,  shall  not  be  limited  by 

law." 

These  four  constitutional  provisions  show  with  what  deft 

and  astute  cunning  and  intelligence  the  trade  union  members 

86 


of  the  Constitutional  Convention  enmeshed  the  employer  in 
a  way  to  render  him  powerless  to  resist  the  demands  of  trade 
union  labor.  Having  this  example  before  them  the  trade 
union  members  of  the  General  Assembly,  there  are  twenty  of 
them,  are  seeking  to  realize  through  statutory  law  the  ad- 
vantages made  permissible  by  the  Constitution  as  amended 
by  their  compatriots  in  the  Constitutional  Convention. 

If  they  succeed,  the  liability  to  an  unlimited  claim  for  a  loss 
caused  by  accidental  death  will  be  a  drastic  coercive  persuader 
to  induce  all  employers  to  participate  in  creating  a  state 
monopoly  in  compensation  insurance. 

Can  you  see  any  limit  to  the  pressure  that  can  be  put  on 
employers  by  increasing  the  schedule  of  statutory  compensa- 
tions by  act  of  the  General  Assembly  and  then  increasing  the 
premium  rates  by  order  of  the  State  Liability  Board  of 
Awards  to  provide  the  funds  necessary  to  take  care  of  such 
increase? 

At  a  hearing  on  this  Workmen's  Compensation  bill, — S.  B. 
No.  48,  Mr.  Green, — before  the  Senate  Committee  on  Labor, 
February  11,  1913,  one  of  the  members  of  the  labor  lobby  pre- 
sented to  the  Committee  a  complete  upward  revision  of  the 
schedule  of  awards  fixed  in  the  act,  providing  a  uniform  in- 
crease of  33^  per  cent  and  greatly  augmenting  the  number 
of  weeks  an  injured  employe  would  be  able  to  draw  compen- 
sation, thus  making  a  double  raise.  This  gives  notice  to  all 
employers  to  be  on  their  guard. 

NO    COMPENSATION    FOR    INJURIES    CAUSED    BY 
FAULT    OF    EMPLOYE;    BY    HIS    REFUSAL    OR 
NEGLECT  TO  OBEY  STATUTORY  REQUIRE- 
MENTS;  OR  BY  HIS  INTOXICATION 

It  is  as  unjust  to  compensate  an  injured  workman  for  in- 
juries caused  by  his  own  fault,  negligence  or  carelessness ;  by 
his  refusal  or  neglect  to  obey  statutory  requirements,  or  by 
his  intoxication  as  it  is  to  refuse  to  compensate  him  for  in- 
juries not  so  caused.  For  this-  reason  it  is  necessary,  in  the 
interests  of  all  employers,  of  all  employes,  and  of  the  users 
of  products  and  services,  to  safeguard  the  fund  out  of  which  all 
compensations  must  be  paid,  if  paid  at  all,  by  making  illegal 

87 


any  claim  made  fraudulent  by  any  of  the  faults  herein  named 
or  by  deception  known  as  "malingering." 

Laws  requiring  the  use  of  safety  appliances,  statutes  and 
rules  designed  to  establish  safe  conditions  of  employment, 
cannot  be  enforced  except  through  the  service  of  employes. 
If  they  tamper  with,  remove  or  fail  to  use  safety  appliances ; 
if  they  fail  to  give  notice  when  some  part  of  a  machine  gets 
out  of  order;  if  they  neglect  or  refuse  to  obey  statutory  re- 
quirements or  shop  regulations  designed  to  make  working 
conditions  safe  and  healthful,  it  is  not  possible  for  an  em- 
ployer to  comply  with  such  lawful  requirements.  Above  all, 
the  presence  of  an  intoxicated  man  in  a  shop  where  other  men 
are  at  work  is  destructive  of  effective  discipline,  a  menace  to 
his  fellow  workmen,  and  an  invitation  to  injury  for  himself. 

The  rules  of  justice  require  that  compensation  shall  be  de- 
nied for  all  injuries  so  caused,  and  further,  that  any  employe 
found  guilty  of  any  such  misconduct  shall  be  fined  or  denied 
further  employment. 

The  law  should  make  it  the  duty  of  designated  state  officials 
to  ferret  out  all  fraudulent  claims  and  to  punish  all  fraudulent 
claimants. 

EMPLOYER'S    LIABILITY    FOR   INJURIES    CAUSED 
BY  HIS  OWN  FAULT  OR  NEGLECT 

Compensation  for  the  injured  workman  is  provided  in  the 
policy  or  contract  of  collective  insurance.  No  question  as  to 
the  validity  of  the  workman's  claim  for  compensation  can  be 
raised  by  the  insurance  company  on  account  of  any  fault  or 
neglect  on  the  part  of  his  employer. 

A  workmen's  compensation  law  should  not  be  made 
the  vehicle  for  securing  compliance  with  statutory  regula- 
tions designed  to  render  working  conditions  safe  and  health- 
ful, the  fact  of  non-compliance,  established  by  a  state  inspector, 
must  be  made  a  cause  of  penal  action  against  an  employer. 
The  penalty  should  not  be  less  than  twice  the  compensation 
paid  on  account  of  the  loss  caused  by  failing  to  comply  with 
the  law.  It  should  be  collected  by  the  State  for  the  support 
of  its  inspection  service. 

88 


INSPECTION    OF   MACHINERY   AND   SAFETY 
DEVICES 

Inspection  to  determine  compliance  with  statutory  regula- 
tions designed  to  render  working  conditions  safe  and  health- 
ful, conserves  the  safety  of  property  as  well  as  of  life.  Such 
inspection  should  be  required  by  the  state,  regardless  of  the 
question  of  compensation  for  industrial  injuries.  The  penalty 
of  neglect  should  be  an  order  to  stop  the  operation  of  a  boiler, 
flywheel,  transmission  machinery,  elevator,  planer,  lathe,  or 
whatever  device  or  machinery  may  be  found  faulty,  until  the 
same  is  made  safe.  Compensation  to  workmen  injured  by 
continuing  the  use  of  machinery  known  to  be  unsafe  cannot 
cover  the  whole  requirement.     Safety  laws  should  be  obeyed. 

The  state  can  protect  the  common  good  against  inefficient 
inspection  by  discharging  the  inefficient  inspector. 

CREATION   OF   COMPENSATION   FUNDS 

All  compensation  funds  are  accumulated  by  the  collection 
of  premium  payments  made  by  employers.  Laws  that  require 
a  part  of  the  fund  to  be  paid  by  employes  make  the  employer 
the  collector  of  the  fund.  This  brings  the  cost  of  insurance 
to  the  direct  knowledge  of  the  employe  in  the  form  of  a  re- 
duction of  the  amount  of  wages  received  by  him.  Ill  feeling 
is  certain  to  result  and  also  a  constant  pressure  to  recover  the 
loss  by  demands  for  a  corresponding  increase  in  wages. 
These  considerations  make  the  saving  of  expense  in  this  way 
an  expedient  of  doubtful  economic  value  to  the  employer. 

Restraint  upon  employes  is  made  effective  in  all  compensa- 
tion laws  by  provisions  placing  a  limit  on  the  maximum 
amount  that  can  be  recovered  under  all  specified  contin- 
gencies, and  also  providing  that  the  injured  employe  must 
suffer  the  loss  of  from  one  to  three  weeks'  time  before 
his  compensation  will  begin,  and  then,  that  the  compensation 
shall  not  exceed  from  fifty  to  sixty-six  and  two-thirds  per 
cent  of  his  regular  wages. 

These  restrictions  plainly  show  that,  in  any  event,  a  heavy 
percentage  of  the  industrial  loss  is  a  burden  upon  employes 
and  that  far  less  than  the  total  loss  is  placed  upon  the  in- 
dustry. To  impress  this  fact  upon  the  minds  of  those  em- 
ployes who  do  not  think  accurately  or  far,  it  would  be  well 

89 


for  insurance  companies  to  prepare  a  brief  statement  to  be 
furnished  to  employers,  to  be  placed  in  the  pay  envelope  of 
each  employe  each  pay  day,  showing  precisely  how  and  to 
what  extent  he  must  bear  the  burden  of  a  loss  caused  by  an 
industrial  injury. 

SUFFICIENCY    OF    COMPENSATION    FUNDS 

It  is  clear  that  premiums  charged  for  the  purpose  of  creat- 
ing funds  out  of  which  compensation  for  industrial  injuries 
are  to  be  paid  must  be  high  enough  to  create  a  fund  adequate 
to  provide  fully  for  all  losses,  the  cost  of  securing  business 
and  of  administration,  or  the  day  will  come  when  claims  for 
compensation  cannot  be  paid  in  full.  In  such  a  contingency 
the  deficiency  must  be  made  good  in  one  of  three  ways : 

1.  When  the  insurance  is  written  by,  an  insurance  com- 
pany: By  payments  drawn  from  its  surplus  or  by  an  assess- 
ment on  its  stockholders.  In  no  case  can  an  insurance  com- 
pany make  a  special  assessment  on  employers  in  the  form  of  a 
charge  for  an  additional  or  extra  premium;  or  obtain  relief 
from  public  funds  collected  by  taxation. 

2.,  When  the  insurance  is  written  by  a  mutual  company: 
By  a  special  assessment  on  employers  in  the  form  of  a  charge 
for  an  additional  or  extra  premium.  All  mutual  companies, 
to  be  sound,  must  have  power  to  make  such  assessments 
whenever  necessary  or  the  insurance  written  by  them  will 
some  day  prove  to  be  a  delusion ; 

3.  When  the  insurance  is  written  by  a  state  board:  By 
a  special  assessment  on  employers  in  the  form  of  a  charge  for 
an  additional  or  extra  premium,  or  by  placing  the  burden  on 
taxpayers  by  an  appropriation  of  public  funds. 

Any  fund  created  by  a  state  board  that  is  not  guaranteed 
by  authority  to  levy  additional  or  extra  premium  assessments, 
or  by  a  pledge  that  the  state  will  make  good  any  deficiency 
from  funds  secured  by  taxation,  does  not  offer  sufficient  se- 
curity for  the  prompt  payment  of  all  claims  for  industrial  in- 
juries. 

Insurance  written  under  such  conditions  is  certain  to  prove 
to  be  a  delusion  some  day  when  a  crucial  test  comes. 

Insurance  sold  for  premium  payments  that  are  too  low  to 
create  an  adequate  fund  for  the  prompt  payment  of  all  claims 

90 


for  compensation  for  industrial  injuries,  plus  all  costs  of 
securing  business  and  of  administration,  is  sold  at  less  than 
cost.  The  sale  of  any  product  or  service  at  less  than  its  true 
and  entire  cost  inevitably  places  a  burden  of  loss  on  some  one. 

In  the  case  of  an  insurance  service  for  the  compensation  of 
injured  workmen,  this  loss  must  fall: 

First.  Upon  injured  employes,  if  the  deficiency  in  the  com- 
pensation fund  is  not  made  good,  because  there  will  be  no 
funds  with  which  their  claims  for  compensation  can  be  paid ; 

Second.  Upon  stockholders  in  compensation  insurance 
stock  companies; 

Third.  Upon  employers  who  are  members  of  a  mutual  com- 
pensation insurance  company; 

Fourth.  Upon  employers  who  participate  in  a  state 
fund;  or 

Fifth.  Upon  taxpayers  whose  property  is  assessed  for  the 
purpose  of  raising  funds  by  taxation  for  public  purposes. 

The  taxpayers  of  Ohio  are  now  paying  for  such  a  loss 
through  appropriation  of  public  funds  for  the  payment  of  cost 
of  securing  business  and  for  the  administration  of  the  Ohio 
Workmen's  Compensation  Law,  by  the  Ohio  State  Board  of 
Liability  Awards. 

In  the  ''Journal  of  Workmen's  Compensation  Insurance"  for 
September  1,  1912,  issued  by  the  Ohio  State  Liability  Board 
of  Awards,  the  following  statement  is  made  by  the  Board: 

The  protection  given  to  employer  and  employe  alike 
is  given  without  the  cost  of  one  dollar  to  the  Insurance 
Fund,  the  expense  of  the  administration  of  the  Board 
being  borne  by  the  state,  and  every  dollar  paid  into  the 
insurance  fund  can  only  be  used  to  pay  compensation. 

This  statement  would  have  been  more  accurate  if  it  had 
said :  The  expense  of  the  administration  of  the  Board  is  being 
borne  by  the  taxpayers  of  the  state. 

The  appropriation  for  the  expenses.of  this  board  for  the  year 
1912  was  $115,000.00;  the  same  amount  is  now  asked  for  the 
years  1913  and  1914.  Three  hundred  and  forty-five  thousand 
dollars  of  taxpayers'  money  taken  in  the  first  three  years.  Who 
can  tell  how  much  will  be  required  in  ten  years? 

91 


SAFEGUARDS  FOR  COMPENSATION  FUNDS 

Experience  has  demonstrated  the  necessity  for  providing 
legally  required  safeguards  for  all  funds  created  for  the  pur- 
pose of  paying  on  demand  all  claims  for  compensation  for  in- 
dustrial injuries. 

Such  laws  should  be  identical  for  all  funds  not  underwritten 
by  specific  authority  to  make  up  deficits  by  special  asses- 
ments  on  employers,  or  by  a  pledge  of  public  funds  raised  by 
taxation. 

The  workmen's  compensation  fund  created  by  the  Ohio  law 
is  not  safeguarded  in  any  of  these  ways.  Section  17  of  the 
Ohio  workmen's  compensation  law  provides: 

The  state  liability  board  of  awards  shall  classify  em- 
ployments with  respect  to  their  degree  of  hazard,  and 
determine  the  risks  of  the  different  classes  and  fix  the 
rates  of  premium  on  the  risks  of  the  same,  based  upon 
the  total  payroll  and  number  of  employes  in  each  of 
said  classes  of  employment,  sufficiently  large  to  provide 
an  adequate  fund  for  the  compensation  provided  for  in 
•    this  act,  and  to  create  a  surplus  sufficiently  large  to 
guarantee  a  state  fund  from  year  to  year. 
No  power  is  given  to  the  board  to  correct  its  actuarial  mis- 
takes by  reassessing  those  who  have  paid  premiums  demon- 
strated by  experience  to  have  been  too  low  to  satisfy  all  re- 
quirements of  the  law.    Who  shall  pay  for  the  mistakes  of  this 
board?  is  a  question  that  has  been  blindly  left  for  the  future 
to  answer.     This  is  dangerous. 

The  Michigan  workmen's  compensation  law  provides  that 
an  employer  may  "carry  his  own  risks  if  he  can  satisfy  the 
board  of  his  financial  ability  to  do  so." 

This  provision  is  defective  in  not  requiring  such  employer 
regularly  to  set  apart  in  a  special  fund  the  amount  of  the 
premiums  they  otherwise  would  be  required  to  pay,  and  to 
invest  such  funds  under  precisely  the  same  conditions  as  re- 
quired for  the  investment  of  the  compensation  funds  secured 
by  the  collection  of  premiums  by  stock  insurance  companies ; 
mutual  compensation  insurance  companies,  and  the  State 
Board.  The  law  should  also  provide  that  such  fund  shall  not 
be  used  or  be  liable  for  the  payment    of    any    debt    of    the 

92 


employer,  excepting  claims  for  compensation  for  industrial 
injuries  sustained  by  employes  rendering  services  to  such  em- 
ployer. 

NO  STATE  MONOPOLY  IN  COMPENSATION  INSUR- 
ANCE—FAIR COMPETITION 

In  its  Journal  of  Workmen's  Compensation  Insurance,  for 
July  1,  1912,  the  Ohio  State  Liability  Board  of  Awards  says: 
It  is  not  the  belief  of  the  members  of  the  State  Lia- 
bility  Board  of  Awards  that  governmental   authority 
should  take  charge  of  and  conduct  any  business  enter- 
prise which  private  enterprise  may  conduct  in  a  satis- 
factory manner.     In  other  words,  that  the*  government 
should  undertake  to  do  no  act  which  the  people  can  do 
as  well  for  themselves. 
In  his  message  to  the  General  Assembly,  January  14,  1913, 
Governor  James  M.  Cox  says : 

Plain  fairness  suggests  that  in  the  operation  of  utili- 
ties both  private  and  public  ownership  must  be  subject 
to  the  same  standards  of  ethics  and  government. 

If   the   State    Board    (the   State    Liability    Board   of 
Awards)  gives  better  service  and  lower  rates  it  will  be 
perfectly  apparent  that  liability  companies  are  operat- 
ing on  a  wrong  base.     If  on  the  other  hand,  insurance 
concerns  yield  an  advantage  in  both  service  and  rates, 
then   it  would  be   safe   to   assume   that  efficiency   and 
economy  of  administration  are  lacking  with  the  State 
Board.     The  competitive  feature  may  be  wholesome. 
The  objective  to  be  sought  is  the  fullest  measure  of 
protection  to  those  engaged  in  dangerous  occupations 
with  the  least  burden  of  cost  to  society,  because  after 
all  the  social  organization  must  pay  it. 
How  can  a  just  measure  of  relative  efficiency  be  established 
when  all  of  the  operating  expenses  of  the  State  Board  are 
paid  by  taxpayers — not  covered  by  its  premium  rates,  while 
all  of  the  operating  expenses  of  insurance  companies  are  cov- 
ered by  their  premium  rates? 

UNFAIR  COMPETITION:     SELLING  INSURANCE  AT 
LESS  THAN  COST 

The  Ohio  State  Liability  Board  of  Awards,  in  its  Journal 
for  July  1,  1912,  makes  the  following  statement: 

93 


The  Ohio  state  coni])ensation  rates  are  the  lowest 
rates  in  existence  covering  the  protection  affc^rded  by 
law. 

Thie  reason  is  that  Ohio  handles  her  own  insurance 

fund  and  provides  insurance  at  cost. 

From  the  foreging  it  is  clear  that  the  reason  is  that  Ohio 

taxpayers  are  paying  all  expenses  of  administration.     On  this 

account  the  State  Board  is  selling  workmen's  compensation 

insurance  at  less  than  cost. 

This  is  the  kind  of  unfair  competition  always  engaged  in 
by  those  who  desire  to  establish  a  monopoly. 

When  the  State  Board,  after  the  brief  experience  of  a  few 
months,  states  that  it  can  sell  insurance  at  about  one-half  the 
rates  figured  out  by  all  experienced  actuaries,  it  seems  only 
too  probable  that  it  is  heading  straight  toward  a  deficiency — 
toward  trouble  for  the  State  of  Ohio. 

These  rates  are  merely  initial  or  trial  rates,  which,  if  foreign 
experience  is  any  guide,  not  only  cannot  be  maintained,  but 
will  result  in  deficiencies  which  will  lead  to  unduly  high  rates 
or  call  for  state  subsidies  later  on. 

This  attempt  to  sell  insurance  at  less  than  cost,  like  every 
attempt  to  get  something  for  nothing,  will  take  the  shirt  off 
the  tax-payer's  back  when  he  comes  to  pay. 

The  state  has  no  moral  or  economic  right,  it  should  have 
no  legal  right,  to  drive  private  compensation  insurance  com- 
panies out  of  business  by  unfair  competition. 

When  competition  between  state  boards  and  privately 
owned  and  managed  compensation  insurance  companies  is 
openly  conducted  under  an  identical  code  of  regulations,  the 
economic  value  of  intelligent  self-interest  will  be  fairly 
-  matched  against  the  economic  value  of  patriotic  devotion  to 
the  common  good.  From  such  a  competition  that  which  is 
best  for  the  general  welfare ;  best  for  each  industry  involved ; 
best  for  every  employer;  best  for  every  employe,  surely  will 
be  evolved. 

UNIFORM  ACCOUNTS  FOR  ALL  WRITERS  OF 
INSURANCE 
That  this  question  may  be  tested  by  the  records  of  impar- 
tial experience,  the  Legislature  should  appl}^  to  the  problem 

94 


of  workmen's  compensation  insurance  the  recommendation 
made  by  Governor  Cox  to  the  General  Assembly,  January 
14,  1913,  when  he  said,  speaking  of  the  municipal  ownership 
(jf  public  service  utilities : 

The   utilities  commission  should  have  the  right  to 
enforce   the    same    system   of   uniform    accounting   on 
municipalities  operating  utilities  as  are  now  imposed 
upon  private  enterprises,  otherwise  the  public  would 
have  no  means  of  knowing  whether  municipal  plants 
were    conducted    along    the    lines    of    efficiency    and 
economy. 
The  law  should  provide  that  the  State  Commissioner  of 
Insurance  shall  require  the  State  Liability  Board  of  Awards 
to  keep  its  accounts  in  the  same  manner  as  the  accounts  of 
])rivate  insurance  companies  are  kept,  and  shall  declare  it  in- 
solvent when  its  income  from  premiums  and  interest  on  its 
invested  funds  do  not  fully  cover  all  of  its  operating  expenses, 
its  liabilities  for  insurance  written,  with  a  necessary  margin 
to  provide  a  required  reserve,  as  it  would  do  in  the  case  of  a 
private  insurance  company  under  similar  circumstances. 
INSURANCE     WRITTEN     BY     AUTHORIZED     COM- 
PANIES A  COMPLIANCE  WITH  THE  COMPUL- 
SORY REQUIREMENTS  OF  THE  LAW. 
In  making  the  collective  insurance  of  all  employes  compul- 
sory, and  relieving  employers  from  all  liability  for  the  pay- 
ment of  claims  for  compensation  for  injuries  sustained  by 
their  employes,  the  law  should  provide  that  the  payment  of 
the  premium  required  to  the  State  Liability  Board  of  Awards, 
or  to  any  private  compensation  insurance  company,  stock  or 
mutual,  authorized  to  write  insurance  in  the  state,  shall  be 
construed  as  being  a  full  compliance  with  statutory  require- 
ments in  this  behalf. 

SAFEGUARDING  GOOD  WILL. 
Mr.  Emile  E.  Watson,  Actuary  of  the  Ohio  State  Liability 
Board  of  Awards,  does  not    claim    too  much  for  the  new 
methods  to  be  used  in  writing  compensation  insurance  when 
he  says: 

The  plan  should  destroy  the  hostility  and  antagonism 
that  the  employers'  liability  system  has  engendered  and 

95 


should  substitute  for  same  the  sympathetic  co-operation 
of  the  employe  with  his  employer. 

That  this  may  be  most  effectually  done,  the  law  should 
provide  that  every  check,  by  whomever  drawn,  given  in  pay- 
ment of  a  compensation  claimed  for  an  industrial  injury, 
should  be  transmitted  to  and  countersigned  by  the  employer 
as  an  evidence  to  him  of  the  payment  of  the  compensation 
for  which  he  has  paid,  and  as  an  evidence  to  the  employe 
that  his  employer  did  provide  for  his  welfare  as  required  by 
the  principles  of  justice  and  statutory  law. 
THE  CARDINAL  PRINCIPLES  OF  AN  EFFICIENT 
WORKMEN'S   COMPENSATION   LAW. 

The  Michigan  Industrial  Accident  Board  states  the  cardinal 
principles  of  an  efficient  workmen's  compensation  law  in  the 
following  concise  terms: 

1.  Reasonable  compensation  at  minimum  cost  for  all  acci- 
dents except  the  result  of  wilful  fault; 

2.  Certainty  of  amount; 

3.  Certainty  of  payment ; 

4.  Payment  without  litigation; 

5.  Prevention  of  accidents. 

It  states  the  purposes  of  such  a  law  to  be: 

That  injured  workmen  may  receive  justice ; 
That  employers  may  have  fixed  liabilities  and  escape 
the  embarrassment  and  expense  of  damage  suits; 

That  courts  be  relieved  of  the  time  of  trying  damage 
suits ; 

That  the  public  treasury  be  relieved  of  the  expense  of 
these  damage  suits; 

That  the  public  be  relieved  of  the  expense  of  caring  for 
the  victims  of  industrial  accidents;  and 

That  more  harmonious  relations  be  promoted  between 

employers  and  employes. 

To  this  statement  of  purposes,  one  other  should  be  added: 

That  each  industry  be  required  to  carry  the  loss  involved  in 

the  payment  of  compensation  for  industrial  injuries  incurred 

by  the  workmen  employed  by  it. 

This  cannot  be  done  if  any  part  of  the  cost  of  insurance  is 
paid  by  taxpayers,  or  any  employer  fails  to  collectively  insure 
all  of  his  employes.  98 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 
BERKELEY 

Return  to  desk  from  which  borrowed. 
This  book  is  DUE  on  the  last  date  stamped  below. 


28Apr'50C£ 

2.7 1983 

fecu  cifC.  ju.i  u  i  1983 


,D  21-100m-ll,'49(B7146Bl6)476 


5^636^"?- 


UNIVERSITY  OF  CAIvIFORNIA  lylBRARY 


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